Opinion
Case No. 3:18-cv-01131-YY
08-16-2019
PATRICK R. DE BORJA, individually and MAKILING FARMS, INC., a Philippine corporation, Plaintiffs, v. ENRIQUE K. RAZON, JR., individually; INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., a Philippine corporation; ICTSI OREGON INC., an Oregon corporation; and JOHN AND/OR JANE DOES 1-20, Defendants.
FINDINGS AND RECOMMENDATIONS :
Before the court are six motions:
1) Defendants Enrique K. Razon, Jr. ("Razon Jr.") and International Container Terminal Services, Inc.'s ("ICTSI") (collectively "foreign defendants") motion to dismiss for lack of jurisdiction (ECF #27);
2) Defendant ICTSI Oregon Inc.'s ("ICTSI Oregon") motion to dismiss for failure to state a claim (ECF #31);
3) Plaintiffs Patrick R. de Borja ("de Borja") and Makiling Farms, Inc.'s ("MFI") motion for jurisdiction-related discovery (ECF #35); and
4) Three motions to strike the declarations in support of foreign defendants' motion to dismiss (ECF ##47-49).
As explained below, foreign defendants' motion to dismiss for lack of jurisdiction (ECF #27) should be granted because this case merits "immediate forum non conveniens dismissal." Sinochem Int'l Co. Ltd. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 435 (2007). The district court has discretion "to respond at once to a defendant's forum non conveniens plea, and need not take up any other threshold objection," including matters of subject matter jurisdiction or personal jurisdiction. Id. at 425. Forum non conveniens is a threshold, non-merits issue that may be prioritized "when considerations of convenience, fairness, and judicial economy so warrant." Id. at 432.
Here, in their various motions, plaintiffs have served up a Gordian Knot of jurisdictional, discovery, and evidentiary issues. Because this action should be brought in the Republic of the Philippines ("the Philippines") regardless of how that knot is untied, it serves the parties and the court to sidestep these "arduous inquir[ies]" and to do so without further delay. Id. at 436; Carijano v. Occidental Petroleum Corp., 643 F.3d 1216, 1227 (9th Cir. 2011) (observing that the Sinochem court "promoted judicial economy by allowing the district court to dismiss the case without first having to address complicated jurisdictional issues").
Based on the extensive briefing of the parties, the court finds this matter suitable for decision without oral argument pursuant to LR 7-1(d)(1).
Additionally, plaintiffs' motion to strike the declaration of defendants' legal expert (ECF #49) should be denied because the court may consider expert testimony regarding foreign law under Federal Rule of Civil Procedure 44.1. All of the remaining motions (ECF ##31, 35, 47-48) should be denied as moot.
Defendants also have filed a motion for sanctions (ECF #73), which will be resolved by separate order. Courts may retain jurisdiction to decide sanctions motions after a dismissal without prejudice. See Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 396-98 (1990); Olcott v. Delaware Flood Co., 76 F.3d 1538, 1553 (10th Cir. 1996) ("Rule 11 sanctions could be enforced despite a lack of subject-matter jurisdiction.") (citing Willy v. Coastal Corp., 503 U.S. 131 (1992)).
FINDINGS
I. Alleged Facts
Plaintiffs' 128-page complaint catalogs the tenuous relationship between the de Borja and Razon families dating back to when Razon Jr.'s grandfather began working at a port in Manila in 1916. Compl. ¶¶ 62, 72, ECF #1. Razon Jr.'s father, Enrique Razon, Sr. ("Razon Sr."), created E. Razon, Inc. ("ERI") in 1962 to provide port operation services in Manila's South Harbor. Id. ¶¶ 62-67. Razon Sr. passed away in 1995. Id. ¶ 55.
The de Borja family formed MFI in 1975 to "hold their common real estate interests primarily consisting of land in Calamba City, Laguna, Philippines." Id. MFI is incorporated under Philippine law and has its principal place of business in Manila, Philippines. Id. ¶ 6.
MFI acquired 5% of ERI in 1976. Id. ¶ 68. In 1978, Razon Sr. became involved with the Marcos regime and demanded MFI's equity interest in ERI, but MFI refused. The families had a falling out, and MFI has not been informed of ERI's governance since that time. Id. ¶¶ 72, 89.
The complaint details ERI's dealings with the Marcos regime and how ERI came under the regime's patronage until the regime was overthrown in 1986. Id. ¶¶ 73-74.
In 1987, Razon Sr. amalgamated ERI with two other entities, without the notice or consent of ERI's minority shareholders, to bid on a renewable 25-year contract to operate a container terminal in Manila's North Harbor. Id. ¶¶ 83-87. After securing the contract, the three entities formed ICTSI. Id. ERI ceased to operate independently of ICTSI and effectively became a holding company. Id. ¶ 88.
Following the ouster of the Marcos regime in 1986, the first official act of the Philippine's new government was to create the Presidential Commission on Good Government ("PCGG"), which was tasked with recovering ill-gotten wealth from Marcos and his collaborators. Id. ¶¶ 74-76. In the late 1980s, during and after ICTSI's founding, the PCGG sued Razon Sr. for his involvement in several corrupt enterprises to recover ill-gotten wealth. Id. ¶¶ 77-82. These suits resulted in an unofficial settlement agreement between a member of the PCGG on behalf of the Philippines and Razon Sr. and his family, referred to hereafter as the "1990 Compromise." Id. ¶ 99. The 1990 Compromise was not properly approved by the PCGG or the Sandiganbayan, a Philippine court with special jurisdiction over corruption cases. Id. ¶¶ 101-102, n.73.
Plaintiffs allege that Razon Sr. and Razon Jr. fraudulently made four undisclosed, self-dealing transactions to divest ERI's minority shareholders, including MFI, of their stake in ICTSI. Id. ¶¶ 90-94. These fraudulent transactions were structured to appear as if they were made for valuable consideration, in part by satisfying penalties owed under the 1990 Compromise. Id. ¶ 95. But ERI was not a party to the 1990 Compromise, and plaintiffs claim that Razon Sr. fraudulently satisfied his personal liability under the 1990 Compromise with ERI shares. Id. ¶¶ 98-107.
Plaintiffs learned of the fraudulent amalgamation creating ICTSI in 2004. Id. ¶¶ 123-33. On October 7, 2004, MFI sent a demand letter to Razon Jr. asserting it owned up to 10% of ERI, and that it knew about three of the underlying fraudulent transactions—even attaching the deeds of conveyance and assignment consummating those transactions to the demand letter. Compl., Ex. 6, ECF #1-10. Plaintiffs allege that Razon Jr. strung them along for the next 12 years under false pretenses (including by making settlement offers) to hide the nature of the fraudulent transactions, and that it was not until January 8, 2016, that they learned the Sandiganbayan had not approved any agreement between ERI and the PCGG. Id. ¶¶ 134-37. Plaintiffs also claim they did not obtain a copy of the agreement consummating the 1990 Compromise until late 2016. Id. ¶ 99, n.70.
In March 2016, MFI enlisted the local prosecutor to bring criminal fraud or estafa charges against Razon Jr., commencing Makiling Farms, Inc. v. Enrique Razon, Jr., No. XV-07-INV-lGG-03550 (the "estafa case"). Plaintiffs claim that Razon Jr. has corrupted the local prosecutor, who has refused to indict Razon Jr. for his part in the crimes against ERI and therefore its minority shareholders, including plaintiffs. Id. ¶¶ 142-152. Plaintiffs allege that because Razon Jr. has not been indicted, he "has made a mockery of the Philippine administrative and judicial system." Id. ¶ 142. Plaintiffs accuse the local prosecutor of taking "pains to disregard incontrovertible incriminating evidence," id. ¶ 143, "glossing over and outright ignoring evidence," id. ¶ 144, turning "a blind eye and deaf ear to completely overlook" certain evidence, id. ¶ 145, "directly and arbitrarily ignoring reality," id., and issuing a "bewildering order," id. ¶ 148, that is "[t]ortured and attenuated to the point of unintelligible." Id. ¶ 146. Plaintiffs appealed the local prosecutor's order in the estafa case, id. ¶ 151, and on December 13, 2018, the Secretary for the Philippine Department of Justice denied MFI's appeal. Decl. Román Hernández ¶ 5, ECF #74. A motion for reconsideration of that order is pending.
On May 24, 2018, approximately one month before plaintiffs filed this action, de Borja paid ?100, or about $2, for one share of ERI stock. Deed of Assignment, ECF #44-2. This is the first time de Borja has personally owned any ERI stock. De Borja purchased this stock and became president of MFI for the purpose of suing in the United States. Decl. Patrick R. de Borja ¶¶ 9-10 ("I thought that as a [U.S.] citizen I could alternatively file in the [U.S.]. . . I volunteered with my siblings to bring the case the case in the [U.S.] I accordingly assumed leadership as [MFI's] President with a separate ERI share commensurately assigned to me individually.").
Plaintiffs assert twenty-two claims, including fraud, breach of fiduciary duty, civil conspiracy, misappropriation, and conversion. Plaintiffs claim they are entitled to their share of ERI and by extension a proportional share of ICTSI for a total of ?1,974,702,430.10, or approximately $37 million. Compl. ¶¶ 120-22.
II. Plaintiffs' Motion to Strike the Declaration of Defendants' Legal Expert
As an initial matter, plaintiffs' motion to strike the declaration of defendants' legal expert, Ramon S. Esguerra ("Esguerra"), should be denied. ECF #49. Both parties assert that Philippine law governs in this dispute, and both parties have submitted declarations of experts in Philippine law. Compl. ¶ 163; Defs.' Mot. 27, ECF #27. Plaintiffs rely on the testimony of retired Philippine Supreme Court Justice Jose Armando R. Melo ("retired Justice Melo"). ECF #43. Defendants' legal expert, Esguerra, is a lawyer who has been practicing law in the Philippines since 1980. Esquerra Decl. ¶ 3, ECF #32. He is the managing partner of a law firm that handles a wide variety of cases, as well as a law professor and professional lecturer. Id. ¶ 4. He has served as chair and president of the Intellectual Property Association of the Philippines, governor of the Integrated Bar of the Philippines, national director of the Bar's Commission on Integrity and Bar Discipline, and an examiner in political and international law for the Philippine bar examination. Id.
Esguerra's testimony is proper under Federal Rule of Civil Procedure 44.1, which provides: "In determining foreign law, the court may consider any relevant material or source, including testimony, whether or not submitted by a party or admissible under the Federal Rules of Evidence. The court's determination must be treated as a ruling on a question of law." (Emphasis added).
Plaintiffs move to strike the Esguerra declaration as inadmissible under Federal Rules of Evidence 104(a) and 702. See Pls.' Mot. Strike 2, ECF #49. However, these rules do not govern the admissibility of a legal expert's interpretation of foreign law. The Supreme Court specifically amended Rule 44.1 in 1972 to eliminate "a general reference to the rules of evidence" because "the purpose of the provision is to free the judge, in determining foreign law, from any restrictions imposed by evidence rules." Adv. Comm. Notes (1972 Amendment), FED. R. CIV. P. 44.1. "Although, pursuant to Rule 44.1, courts may ascertain foreign law through numerous means, expert testimony accompanied by extracts from foreign legal materials has been and will likely continue to be the basic mode of proving foreign law." Universe Sales Co. v. Silver Castle, Ltd., 182 F.3d 1036, 1038 (9th Cir. 1999) (citing 9 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FED. PRAC. AND PROC. § 2444 (2d ed. 1995)). "One of the objectives of Rule 44.1 was to abandon the fact characterization of foreign law and to make the process of determining alien law identical with the method of ascertaining domestic law to the extent that it is possible to do so. Thus, the trial court's freedom of inquiry no longer is encumbered by any restraint on its research or by the rules of admissibility." 9A FED. PRAC. & PROC. CIV. § 2444 (3d ed. 2019).
Plaintiffs claim that Esguerra's conclusions are based on a lack of foundation and contend that his characterization and interpretation of Philippine law is incorrect. ECF #49. However, there is no doubt that Esguerra is qualified to provide his opinion, based on his decades of experience as a lawyer and professor and the breadth and diversity of his practice. The interpretation of Philippine law is ultimately up to the court to decide, and it may be aided by an expert such as Esguerra under Rule 44.1. Moreover, these findings and recommendations do not rely on Esguerra's declaration beyond a limited interpretation of Philippine law, which is referenced by citation herein. Accordingly, to the extent Esguerra draws conclusions based on purported facts, the court has no need to consider those matters, and plaintiffs objections in that regard are moot. III. Defendants' Motion to Dismiss under Forum Non Conveniens
A. Legal Standards—Motion to Dismiss
In evaluating a motion to dismiss, the court must accept the allegations of material fact as true and construe those allegations in the light most favorable to the non-moving party. Odom v. Microsoft Corp., 486 F.3d 541, 545 (9th Cir. 2007). In addition to the allegations in the complaint, the court may consider documents whose authenticity no party questions that are attached to, or incorporated by reference into, the complaint, as well as matters capable of judicial notice. Swartz v. KPMG LLP, 476 F.3d 756, 763 (9th Cir. 2007); Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005). The court need not accept as true allegations in the complaint that contradict these sources. Lazy Y Ranch, Ltd., v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008).
B. Forum Non Conveniens
"A forum non conveniens determination is committed to the sound discretion of the district court." Lueck v. Sundstrand Corp., 236 F.3d 1137, 1143 (9th Cir. 2001) (citations omitted); Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1178 (9th Cir. 2006) ("We will reverse the district court's determination only where there has been a clear abuse of discretion."). "Forum non conveniens is an exceptional tool to be employed sparingly, not a doctrine that compels plaintiffs to choose the optimal forum for their claim." Dole Food Co. v. Watts, 303 F.3d 1104, 1118 (9th Cir. 2002) (citation, quotation marks, and alternations omitted). The standard is "whether defendants have made a clear showing of facts which establish such oppression and vexation of a defendant as to be out of proportion to plaintiff's convenience, which may be shown to be slight or nonexistent." Id. As the moving party, the defendant bears the burden of showing that (1) there is an adequate alternative forum, and (2) the balance of private and public interest factors favors dismissal." Id.; Ayco Farms, Inc. v. Ochoa, 862 F.3d 945, 950 (9th Cir. 2017) ("the private and public interest factors must 'strongly favor trial in a foreign country'") (quoting Lueck, 236 F.3d at 1145).
In short, plaintiffs' claims arise out of allegedly fraudulent transactions that were contemplated and executed in the Philippines by Philippine citizens and corporations in Philippine currency, concerned Philippine stocks and assets, and involved Philippine government entities. Philippine law governs the claims, and related criminal proceedings concerning the same underlying conduct are currently pending in the Philippines. As discussed below, the Philippines is an adequate alternative forum and the balance of private and public interest factors strongly favor dismissal under the doctrine of forum non conveniens.
1. Adequate Alternative Forum
"An alternative forum ordinarily exists when defendants are amenable to service of process in the foreign forum and when the entire case and all parties can come within the jurisdiction of that forum." Gutierrez v. Adv. Med. Optics, Inc., 640 F.3d 1025, 1029 (9th Cir. 2011) (quoting Dole Foods, 303 F.3d at 1118) (quotation marks omitted). "An alternative forum is adequate if the intended forum is capable of 'provid[ing] the plaintiff with a sufficient remedy for his wrong.'" Id. (quoting Dole Foods, 303 F.3d at 1118) (alterations in original). It is only in "rare circumstances . . . that this requirement is not met." Lueck, 236 F.3d at 1143 (quoting Lockman Found. v. Evangelical Alliance Mission, 930 F.2d 764, 768 (9th Cir. 1991)).
Defendants have met their burden of establishing that the Philippines is an adequate alternative forum. All real parties in interest are within the jurisdiction of the Philippines and subject to service. Foreign defendants are domiciled in the Philippines, and they are currently defending the appeal of the estafa case there. Compl. ¶¶ 7, 23. Both MFI and de Borja also are within the jurisdiction of the Philippines. MFI is a Philippine corporation with its principal place of business in the Philippines, and de Borja is a dual U.S.-Philippine citizen who "splits his time between the Philippines and the United States." Id. ¶¶ 5-6.
The only party with any ties to Oregon, defendant ICTSI Oregon, is merely a nominal defendant that came into existence in 2010, decades after any alleged fraudulent activity occurred. See id. ¶ 32. Plaintiffs allege ICTSI owns ICTSI Ltd., a Bermuda subsidiary, which owns ICTSI Oregon. Id. ¶ 24. However, plaintiffs do not allege that ICTSI Oregon has engaged in any wrongful conduct. It is therefore immaterial that ICTSI Oregon may not be amenable to suit in the Philippines, just as ITCSI's many other subsidiaries may not be within Philippine jurisdiction. Accord Navarro Sav. Ass'n v. Lee, 446 U.S. 458, 461 (1980) ("a federal court must disregard nominal or formal parties and rest jurisdiction only upon the citizenship of real parties to the controversy"). As defendants explain: "[T]his has nothing to do with Defendant ICTSI, Inc.'s operation of its port facilities. This dispute centers around a falling out nearly three decades ago between two Philippine families, one of whom happens to operate a port facilities business. Defs.' Reply 24, ECF #79.
Plaintiffs contend that ICTSI Oregon is an alter ego of ICTSI and Razon Jr. and ask the court to permit discovery on this and other jurisdictional issues. Compl ¶¶ 48, 162; Mot. Jurisdiction-Related Discovery, ECF #35. No such discovery is necessary, however, because under the doctrine of forum non conveniens, "the court may, in the exercise of its sound discretion, dismiss the case, even if jurisdiction and proper venue are established." Am. Dredging Co. v. Miller, 510 U.S. 443, 448 (1994) (citation and internal quotation marks omitted); see also Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 507 (1947) ("The principle of forum non conveniens is simply that a court may resist imposition upon its jurisdiction even when jurisdiction is authorized by the letter of a general venue statute."); Sarandi v. Breu, No. C 08-2118 SBA, 2009 WL 2871049, at *8 (N.D. Cal. Sept. 2, 2009) ("The focus with respect to a forum non conveniens motion is notwithstanding the presence of venue and jurisdiction, whether the Court, in its discretion, should decline to exercise jurisdiction over the dispute.") (citing Sinochem, 549 U.S. at 424 ) (emphasis in original). While plaintiffs 35-page motion for jurisdiction-related discovery sometimes refers to the doctrine of forum non conveniens, it does not seek facts that might bear on that analysis, specifically whether the Philippines is an adequate forum, any of the public interest factors, or any of the private interest factors besides the residence of the parties. "Although it is possible that discovery might [provide] more detail, [the parties have] provided 'enough information to enable the [this court] to balance the parties' interests." Cheng v. Boeing Co., 708 F.2d 1406, 1412 (9th Cir. 1983) (quoting Piper Aircraft Co. v. Reyno, 454 U.S. 235, 258 (1981)) (affirming forum non conveniens dismissal in which district court denied discovery limited to issues of forum non conveniens); Marra v. Papandreou, 33 F. Supp. 2d 17, 19 (D.D.C. 1999) (granting leave to file a motion to dismiss on forum non conveniens grounds as "[t]he forum non conveniens issue does not require preliminary discovery").
Local Rule 26-3(b) requires court approval before filing a discovery motion in excess of 10 pages. Plaintiffs did not seek prior court approval before filing their 35-page motion, complete with 90 single-spaced footnotes.
Moreover, this is not one of those rare circumstances where the alternative forum is so clearly inadequate that there "is no remedy at all." Lueck, 236 F.3d at 1143. Plaintiffs argue that powerful entities in the Philippines have corrupt influence over the judiciary and that because foreign defendants are powerful entities, plaintiffs will not receive a fair trial there. Pls.' Resp. 74, ECF #42. They cite the Transparency International Organization's Corruption Perception Index for 2018, which ranks the Philippines 99th out of 180 countries for its level of corruption. But generally, "it is not the business of our courts to assume the responsibility for supervising the integrity of the judicial system of another sovereign nation." Blanco v. Banco Indus. de Venezuela, S.A., 997 F.2d 974, 982 (2d Cir. 1993) (citation and quotations omitted). If plaintiffs' metric were the standard, nearly half of all countries worldwide would be inadequate forums. Instead, under binding precedent, the question is "whether some remedy exists; whether the remedy afforded is less favorable in the foreign forum is not determinative." Neuralstem, Inc. v. ReNeuron, Ltd., 365 F. App'x 770, 771 (9th Cir. 2010) (citing Lueck, 236 F.3d at 1143-44).
Available at https://www.transparency.org/cpi2018.
Plaintiffs' legal expert, retired Justice Melo, does not dispute that the Philippines is generally an adequate forum, but contends that because of foreign defendants' powerful and influential stature, plaintiffs will have no recourse there. Melo Decl. ¶¶ 20-26, ECF #43. However, in their complaint, plaintiffs rely on several Philippine Supreme Court cases that hold members of the Razon family to account. See Compl. ¶¶ 76-77 (quoting extensively from E. Razon, Inc. and Enrique Razon v. Philippine Ports Authority, G.R. No. 75197, 22 June 1987, in which the Philippine Supreme Court rejected Razon Sr.'s claim that he was a victim of the Marcos regime and his attempt to dissociate himself from its illegal conduct); id. ¶¶ 78, 80 (discussing Republic of the Philippines vs. Alfredo (Bejo) T. Romualdez, Case No. 0010 July 22, 1987, and how the Philippine Supreme Court held Razon Sr. and 48 other impleaded defendants liable for ?51 billion in damages); id. ¶ 81 (discussing the PCGG's criminal case, Republic of the Philippines v. Enrique Razon, PCGG I.S. NO. 0044, brought against Razon Sr. in connection with the corrupt acquisition of a $30 million loan); id. ¶¶ 108-109 (quoting language from Enrique Razon, Jr. v. National Labor Relations Commission, G.R. No. 80502, 7 May 1990, 185 SCRA 44, where the Philippine Supreme Court disparaged Razon Jr. for "high-handedness, caprice and arbitrariness" in terminating a long-time employee to avoid paying him retirement benefits); id. ¶ 111 (discussing how the Philippine Supreme Court found that Razon Sr.'s personal use of company funds evidenced bad faith and constituted actual or constructive fraud in Ramon A. Diaz v. Sandiganbayan, G.R. No. 101202, 8 March 1993, 219 SCRA 675). Why the Philippine judiciary is now suddenly incapable of fairly administering justice is unclear. That plaintiffs disagree with the orders of the local prosecutor in the estafa case and that the appeal of those orders has been pending for less than two years provide little reason to find plaintiffs will have "no remedy at all" in the Philippines. Lueck, 236 F.3d at 1143.
The weight of authority has held that the Philippines is an adequate forum. E.g., Tuazon, 433 F.3d at 1180 (holding that defendant "satisfied its burden to demonstrate the existence of an adequate alternative forum in the Philippines"); Contact Lumber Co. v. P.T. Moges Ship. Co. Ltd., 918 F.2d 1446, 1450 (9th Cir. 1990) (same); Transunion Corp. v. Pepsico, Inc., 640 F. Supp. 1211, 1217 (S.D.N.Y. 1986) (same), aff'd, 811 F.2d 127 (2d Cir. 1987); Cruz v. Mar. Co. of Philippines, 549 F. Supp. 285, 289 (S.D.N.Y. 1982) (same), aff'd, 702 F.2d 47 (2d Cir. 1983). That the district court in Canales Martinez v. Dow Chem. Co. found the Philippines was unavailable and inadequate is inapposite. 219 F. Supp. 2d 719 (E.D. La. 2002). There, the Philippines was not an available forum to the plaintiffs because the prescription period, which had already run, was not waivable under Philippine law, nor was it adequate, because plaintiffs had already filed three cases there six years prior and because the Philippine court had not resolved jurisdictional challenges or set a trial date during that period. See id. at 739-40. Plaintiffs make no such contentions here. "To demonstrate that a foreign nation is an inadequate forum due to corruption, a party must make a "powerful showing" that includes specific evidence." Carijano, 643 F.3d at 1226 (quoting Tuazon, 433 F.3d at 1179). Plaintiffs have not done so. Under these circumstances, the Philippines is an adequate alternative forum.
2. Deference to Plaintiffs' Choice of Forum
"[T]here is ordinarily a strong presumption in favor of the plaintiff's choice of forum, which may be overcome only when the private and public interest factors clearly point towards trial in the alternative forum." Piper Aircraft, 454 U.S. at 255-56. "When the home forum has been chosen, it is reasonable to assume that this choice is convenient." Id. at 256. "When the plaintiff is foreign, however, this assumption is much less reasonable. Because the central purpose of any forum non conveniens inquiry is to ensure that the trial is convenient, a foreign plaintiff's [forum] choice deserves less deference." Id. Further, "where the forum lacks any significant contact with the activities alleged in the complaint, plaintiff's choice of forum is given considerably less weight, even if the plaintiff is a resident of the forum." United Tactical Systems LLC v. Real Action Paintball, Inc., 108 F. Supp. 3d 733, 752 (N.D. Cal. 2015); see Gemini Capital Group, Inc. v. Yap Fishing Corp., 150 F.3d 1088, 1091 (9th Cir. 1998) ("noting that plaintiff's choice of forum 'is entitled to only minimal consideration' when 'the forum of original selection . . . has no particular interest in the parties or subject matter'") (quoting Pacific Car & Foundry Co. v. Pence, 403 F.2d 949, 954 (9th Cir. 1968)).
Here, plaintiffs did not choose their home forum. MFI is a Philippine corporation with its principal place of business in the Philippines and de Borja is a dual U.S.-Philippine citizen who "splits his time between the Philippines and the United States." Compl. ¶¶ 5, 6. De Borja declares that he "currently is and continues to regularly reside (when state-side) and receive mail at an address in San Bruno, California." Id. Therefore, while de Borja's choice of forum must be accorded some deference, it is entitled to less than if he had chosen his home forum of San Bruno, California. See Boston Telecomm. Grp., Inc. v. Wood, 588 F.3d 1201, 1207 (9th Cir. 2009) (holding that United States citizens suing in a state other than their state of residence deserve more deference than truly foreign plaintiffs but less deference than citizens suing in their state of residence).
Additionally, "the more it appears that the plaintiff's choice of a U.S. forum was motivated by forum-shopping reasons . . . the less deference the plaintiff's choice of forum commands." Ayco Farms, 862 F.3d at 950 (quoting Vivendi SA v. T-Mobile USA Inc., 586 F.3d 689, 695 (9th Cir. 2009)). Here, it appears that such forum shopping has occurred. The only Oregon party, ICTSI Oregon, is a nominal defendant, and the allegations do nothing to impugn ICTSI Oregon, which did not exist until 2010. Compl. ¶ 32. Moreover, de Borja became president of MFI and purchased a single share of ERI stock only one month before filing suit, for the admitted purpose of suing in the United States. Decl. Patrick R. de Borja ¶¶ 9-10 ("I thought that as a [U.S.] citizen I could alternatively file in the [U.S.]. . . I volunteered with my siblings to bring the case the case in the [U.S.] I accordingly assumed leadership as [MFI's]President with a separate ERI share commensurately assigned to me individually."); Deed of Assignment, ECF #44-2. Even if these 11th-hour transactions gave de Borja double-derivative standing to bring suit, it shows plaintiffs are forum shopping. Accord VictoriaTea.com, Inc. v. Cott Beverages, Canada, 239 F. Supp. 2d 377, 381 (S.D.N.Y. 2003) ("where the local claimant is only nominally American, as in the case of an assignee of a foreign corporation, the courts have generally refused to give special deference to plaintiff's choice of forum") (collecting cases).
Finally, MFI initiated the estafa case against the foreign defendants in the Philippines in March 2016, and only sued here after receiving an unfavorable outcome in that case. See Compl. ¶¶ 142-152. The existence of related proceedings in a foreign forum is another factor favoring dismissal. Ayco Farms, 862 F.3d at 951; Lueck, 236 F.3d at 1147; see also Creative Tech., Ltd. v. Aztech System Pte., Ltd., 61 F.3d 696, 703 (9th Cir. 1995) (approving of the district court's assignment of weight to the existence of a parallel action in a later stage of litigation in an alternative adequate forum). These facts paint "an overall picture of an effort to take unfair advantage of an inappropriate forum." Carijano, 643 F.3d at 1228. Accordingly, plaintiffs' choice of forum is entitled to very little deference.
3. Balance of Private and Public Interest Factors
a. Private Interest Factors
Courts consider the following private interest factors: (1) the residence of the parties and witnesses; (2) the forum's convenience to the litigants; (3) access to physical evidence and other sources of proof; (4) whether unwilling witnesses can be compelled to testify; (5) the cost of bringing witnesses to trial; (6) the enforceability of the judgment; and (7) all other practical problems that make trial of a case easy, expeditious, and inexpensive. Lueck, 236 F.3d at 1145 (quoting Gilbert, 330 U.S. at 508). Several of these factors are discussed together for efficiency. See Boston Telecomm., 588 F.3d at 1208.
i. Residences of Parties and Convenience to Litigants
Oregon is an inconvenient forum, as all real parties in interest reside in the Philippines. Razon Jr. is a Philippine citizen and lives in the Philippines. Decl. Enrique K. Razon, Jr. ¶ 2, ECF #28. He is the Chairman and Chief Executive Officer of ICTSI. Id. ¶ 3. He does not own, lease, or manage any property in Oregon, and he has no connections with Oregon. Id. ¶ 7. He has been to Oregon only one time since 2010. Id. ¶ 8. ICTSI is incorporated in the Philippines and has its principal place of business in Manila, Philippines. Id. ¶¶ 4-5. ICTSI does not conduct any business or have any employees in Oregon. Id. ¶ 5. Similarly, MFI is a Philippine corporation with its principal place of business in the Philippines. Compl. ¶ 6. De Borja splits his time between the United States and the Philippines, but as CEO of MFI, he also resides in the Philippines. While ICTSI Oregon is located in Oregon, it is a nominal defendant without any connection to the underlying dispute.
Plaintiffs are willing to travel to Oregon to litigate their claims, which weighs against dismissal. However, the vast inconvenience to foreign defendants and the fact that all real parties in interest reside in the Philippines weigh toward dismissal. See Carijano, 643 F.3d at 1229.
ii. Access to Evidence and Ability to Compel Testimony
Plaintiffs' claims arise out of misconduct that took place nearly thirty years ago in the Philippines by Philippine citizens and corporations, in Philippine currency, concerning Philippine stocks and assets, and involving the PCGG, a Philippine government entity. All conceivable evidence is in the Philippines, including evidence in the custody of the Philippine government. See Compl. ¶¶ 6 (MFI), 7 (Razon Jr.), 20 (ICTSI), 74 (PCGG), 99 (1990 Compromise).
The Philippines is not a signatory of the Hague Evidence Convention, which provides for the efficient transmission of evidence abroad. While perhaps not impossible, it will at the very least be difficult and burdensome to try this case in Oregon. See Gilbert, 330 U.S. at 511 ("to fix the place of trial at a point where litigants cannot compel personal attendance [of witnesses] and may be forced to try their cases on deposition, is to create a condition not satisfactory to court, jury or most litigants"). Therefore, the ability to access evidence and compel testimony weighs toward dismissal.
See Hague Conference on Private International Law, Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters at Status Table, https://www.hcch.net/en/instruments/conventions/status-table/?cid=82 (last visited June 12, 2019).
iii. Cost of Bringing Witnesses to Trial
Courts also consider where witnesses reside and the cost of bringing witnesses to trial. Boston Telecomm., 588 F.3d at 1208. In doing so, the court should consider the "materiality and importance" of each witness. Id. at 1210 (quoting Lueck, 236 F.3d at 1146).
While the parties have not identified any potential witnesses, it can be reasonably inferred that any witnesses reside in the Philippines. To the extent they could be compelled to testify in Oregon, it is obvious that it would at considerable expense and inconvenience. See Erausquin v. Notz, Stucki Mgmt. (Bermuda) Ltd., 806 F. Supp. 2d 712, 727 (S.D.N.Y. 2011) (observing "the ease and expense of transporting witnesses from Luxembourg to Switzerland will be far less burdensome than to New York"); Windt v. Qwest Commc'ns Int'l, Inc., 544 F. Supp. 2d 409, 429 (D.N.J.), aff'd, 529 F.3d 183 (3d Cir. 2008) (finding plaintiffs' actions appeared to be "oppressive or vexatious" in part because there was similar litigation in Amsterdam and litigating the case in New Jersey would involve "flying witnesses . . . across the Atlantic both ways on regular basis, thus incurring substantial travel and accommodation expenses"); In re Banco Santander Secs.-Optimal Litig., 732 F. Supp. 2d 1305, 1337 (S.D. Fla. 2010), aff'd sub nom. Inversiones Mar Octava Limitada v. Banco Santander S.A., 439 F. App'x 840 (11th Cir. 2011) ("The location of the majority of parties and witnesses clearly points to trial in Ireland as a more convenient and less expensive forum than the United States."); Chengwu Zhao v. Guo Qiang Ye, No. 3:14-CV-00157-MO, 2015 WL 2170124, at *3 (D. Or. May 6, 2015), aff'd, 748 F. App'x 732 (9th Cir. 2018) ("The excessive cost and inconvenience of travel between Portland and China supports dismissal on forum non conveniens grounds."). This factor, therefore, weighs in favor of dismissal.
Plaintiffs argue that defendants "are silent" on this issue, Pls.' Resp 70, ECF #42, and attempt to compare this case to this court's decision in Birdwell & Janke, LLP v. Farkas, 3:18-CV-00910-YY, 2018 WL 6072030 (D. Or. Oct. 19, 2018), findings and recommendations adopted, 3:18-CV-00910-YY, 2018 WL 6070339 (D. Or. Nov. 20, 2018). The dispute in Birdwell centered around unpaid legal fees for services that Oregon patent attorneys performed in Oregon for California defendants. Id. at *4. As discussed at length above, this case involves matters that took place in the Philippines. Transporting witnesses between neighboring states is much less arduous than transporting them 6,000 miles across the Pacific Ocean. The economic and logistical hurdles at issue in Birdwell simply do not compare to the intercontinental factors at play here. Thus, Birdwell is inapplicable and unpersuasive for purposes of this analysis.
iv. Enforceability of the Judgment
Defendants' legal expert, Esguerra, affirms:
Philippine law requires that, before a foreign judgment may be given effect in the Philippines, the same must be recognized first either (a) through a petition instituted specifically for the enforcement of the judgment, or (b) through recognition of a foreign judgment or in another action where the party invokes the foreign decree as an integral part of the claim or defense. While it is possible to execute a foreign judgment in the Republic of the Philippines, the same cannot be
done without the filing of an action in a Philippine court. I have formed my opinion based on the legal precedent established by the Philippine Supreme Court in Bank of the Philippine Islands v. Guevara (G.R. No. 167052, 11 March 2015).Esguerra Decl. ¶ 11, ECF #32.
In Guevara, the Philippine Supreme Court held that
a judgment or final order of a foreign tribunal cannot be enforced simply by execution. Such judgment or order merely creates a right of action, and its non-satisfaction is the cause of action by which a suit can be brought upon for its enforcement. An action for the enforcement of a foreign judgment or final order in this jurisdiction is governed by Rule 39, Section 48 of the Rules of Court. . . .G.R. No. 167052, 11 March 2015. Retired Justice Melo confirms that foreign judgments may be enforced in the Philippines, as a "judgment or final order is presumptive evidence of a right." Melo Decl. ¶¶ 69-70, ECF #43 (quoting 1997 Rules of Civil Procedure, Rule 39, Section 47). Thus, while plaintiffs may be able to enforce a judgment secured in this action in the Philippines, plaintiffs would have to bring a separate action in a Philippine court to do so. It would be more convenient to resolve this dispute with a single action in the Philippines. Thus, this factor favors dismissal.
v. Other Considerations
"It is often said that the plaintiff may not, by choice of an inconvenient forum, 'vex,' 'harass,' or 'oppress' the defendant by inflicting upon him expense or trouble not necessary to his own right to pursue his remedy." Gilbert, 330 U.S. at 508. "[T]he doctrine of forum non conveniens prevents misuse of venue by dismissing complainants 'who seek not simply justice but perhaps justice blended with some harassment.'" Europlay Capital Advisors, LLC v. Joensen, No. 2:17-CV-02377-CAS (PLAx), 2017 WL 2937926, at *9 (C.D. Cal. July 10, 2017) (quoting Gilbert, 330 U.S. at 507).
Here, the weight of the above factors suggests that plaintiffs' intention is to oppress and harass defendants with their choice of forum. Plaintiffs' litigation tactics also reveal this intent. Admitted pro hac vice, plaintiffs' counsel Walter Scott inadvertently included defense counsel in an email he sent to plaintiffs' local counsel, Joshua Ross, several days before plaintiffs' responses to defendants' motions to dismiss were due, stating: "Thanks Josh and no worries. Yes on finals over the weekend subject to your edits. Note though I WANT TO OVERWHELM. . . ." Hernández Decl., Ex. E, February 1, 2019 email from Walter Scott, ECF #74-5 (capitalization in original).
Plaintiffs proceeded to file a single 100-page opposition to defendants' two motions to dismiss, and three motions to strike totaling 47 pages. ECF ##42, 47-49. Notably, the 100-page opposition contains 332 single-spaced footnotes. See In re MacIntyre, 181 B.R. 420, 422 (B.A.P. 9th Cir. 1995), aff'd, 77 F.3d 489 (9th Cir. 1996), and aff'd, 79 F.3d 1153 (9th Cir. 1996) (imposing monetary sanctions for using excessive footnotes to squeeze in additional arguments); Kano v. Nat'l Consumer Co-op. Bank, 22 F.3d 899, 899 (9th Cir. 1994) (imposing $1,500 sanction against counsel for failing to comply with page limit); Augustin v. Hess Oil Virgin Islands Corp., No. SX-13-CV-427, 2017 WL 3614263, at *6 (V.I. Super. Aug. 23, 2017) ("Judges impose page limits for a reason. They force parties to hone their arguments and to state those arguments succinctly. Page limits cause, or should cause, parties to dispense with arguments of little or no merit in favor of those arguments that have a better chance of carrying the day. They encourage parties to avoid redundancy. And repetition.") (citation omitted); Bollea v. Clem, 937 F. Supp. 2d 1344, 1348 n.1 (M.D. Fla. 2013) (observing that the briefing "inexcusably contains extensive substantive footnotes in an apparent effort to circumvent the page limits prescribed by the" local rules); Caldera v. J.M. Smucker Co., No. CV 12-4936-GHK (VBKx), 2013 WL 6987893, at *1 (C.D. Cal. Oct. 4, 2013) ("Federal courts routinely warn litigants not to use textual footnotes to evade page limits."). When the text of the 332 footnotes is included, plaintiffs' opposition consists of 37,317 words (after the tables are removed), or 118 pages, which far exceeds 100 pages. See LR 10-6 (word count limit for non-discovery motions is 35 pages/11,000 words, or 314 words per page).
Before this court became aware of Scott's email, it had excused the fact that plaintiffs had violated two local rules in filing their opposition brief:
First, LR 7-2 requires prior court approval before submitting memoranda in excess of 35 pages. Plaintiffs filed their motion for extension of page limits at 4:45 pm, just minutes before filing their response and before this court had the opportunity to consider the motion. Second, LR 7-1 requires the parties to certify that they have "made a good faith effort through personal or telephone conferences to resolve the dispute and have been unable to do so. . . ." While plaintiffs' counsel advised defense counsel by email that he intended to seek leave to file a 100-page consolidated brief, there was no conferral about this in person or over the telephone as required by LR 7-1. See Decl. of Román Hernández ¶ 7, ECF #53. Plaintiffs are warned that disregard for these and other local rules will not be tolerated from this point forward.Order, ECF #71. The court does not condone requiring Philippine citizens and corporations to cross the Pacific Ocean to be "overwhelmed" by lawyers who disregard the court's local rules.
b. Public Interest Factors
Courts consider the following public interest factors: (1) local interest in the lawsuit; (2) the court's familiarity with governing law; (3) burden on local courts and juries; (4) congestion in the court; and (5) costs of resolving a dispute unrelated to this forum. Lueck, 236 F.3d at 1145 (citing Piper Aircraft, 454 U.S. at 259-61, and Gilbert, 330 U.S. at 508-09).
i. Local Interest of Lawsuit
"In determining if there is a local interest in resolving the dispute, the court must ask if the State of Oregon has an identifiable interest in this case." Chengwu (Kevin) Zhao v. Guo Qiang Ye (William), No. 3:14-cv-00157-MO, 2014 WL 4851666, at *4 (D. Or. Sept. 29, 2019) (citing Piper Aircraft, 454 U.S. at 261); Carijano, 643 F.3d at 1232 (holding that "aim of determining if the forum in which the lawsuit was filed has its own identifiable interest in the litigation which can justify proceeding in spite of [the remaining public interest factors]"). Plaintiffs allege that Razon Jr. and Razon Sr. defrauded them in the Philippines in the late 1980s, nearly two decades before the formation of ICTSI Oregon in 2010, an entity with no connection to the underlying facts. None of the underlying conduct occurred in Oregon. No Oregonian suffered or inflicted any harm. It follows that Oregon has a negligible, if any, interest in resolving this lawsuit. This factor, therefore, weighs toward dismissal.
ii. Court's Familiarity with Governing Law
Forum non conveniens "is designed in part to help courts avoid conducting complex exercises in comparative law," and "the need to apply foreign law [therefore] point[s] towards dismissal." Piper Aircraft, 454 U.S. at 251, 260; Calavo Growers of California v. Generali Belgium, 632 F.2d 963, 967 (2nd Cir. 1980) (holding the likelihood that foreign law would govern "lends weight to the conclusion that the suit should be prosecuted in that jurisdiction"). "[C]ourts should prefer to have cases adjudicated in the forum familiar with the law to be applied, instead of taking it upon themselves to become educated about foreign law." Bhatnagar v. Surrendra Overseas, Ltd., 52 F.3d 1220, 1226 n.5 (3d Cir. 1995).
Both parties assert Philippine law governs in this dispute. Compl. ¶ 163; Defs.' Mot. 27, ECF #27. They have already retained experts in Philippine law to help resolve jurisdictional matters, and they would surely proffer additional outside expertise for substantive legal matters. United States courts have previously applied Philippine law, Pls.' Resp. 75 nn.274-75, ECF #42 (collecting cases), but Philippine courts have a much greater interest in resolving this dispute. Moving this case to the Philippines would remove a layer of expensive professionals, to the benefit of all parties and the court. See Hull 753 Corp. v. Elbe Flugzeugwerke, 58 F. Supp. 2d 925, 929 (N.D. Ill. 1999) ("moving this case to Germany will remove a layer of expensive professionals [i.e., experts in German law] to the benefit of all parties").
And generally, Philippine courts should be allowed to interpret Philippine law. Am. Dredging Co., 510 U.S. at 454 ("There is an appropriateness, too, in having the trial of a diversity case in a forum that is at home with the state law that must govern the case, rather than having a court in some other forum untangle problems in conflict of laws, and in law foreign to itself.") (quoting Gilbert, 330 U.S. at 509); Calavo, 632 F.2d at 967 ("the likelihood that Belgian law would govern in turn lends weight to the conclusion that the suit should be prosecuted in that jurisdiction"); Schertenleib v. Traum, 589 F.2d 1156, 1165 (2d Cir. 1978) ("Determining the content of Swiss law is obviously easier at a trial in Geneva."). This court is informed by Republic of Philippines v. Pimentel, 553 U.S. 851, 866 (2008), in which the Supreme Court recognized: "There is a comity interest in allowing a foreign state to use its own courts for a dispute if it has a right to do so. The dignity of a foreign state is not enhanced if other nations bypass its courts without right or good cause." Id. This concern is even more pronounced when related litigation is already underway, as the estafa case is here.
iii. Remaining Public Interest Factors
Generally, the burden on local courts and juries, congestion in the court, and the costs of resolving a dispute unrelated to this forum are all neutral factors, as judiciaries worldwide are burdened in these ways. However, "[t]he administrative difficulties associated with trying a case in a forum located thousands of miles away from the majority of the witnesses and the evidence are obvious." Gonzales v. Naviera Neptuno, A.A., 832 F.2d 876, 879 (5th Cir. 1987)
Moreover, the Supreme Court has maintained that "[j]ury duty is a burden that ought not to be imposed upon the people of a community which has no relation to the litigation." Gilbert, 330 U.S. at 508-09. Here, Oregon jurors, who make personal and financial sacrifices to serve on jury duty, would have little interest in hearing this dispute involving events that occurred in the Philippines, involving Philippine nationals and corporations. Plaintiffs contend that defendants have "substantial port operations in Oregon that affect Oregon's economy." Pls.' Resp. 99, ECF #42. But, again, as defendants explain: "[T]his has nothing to do with Defendant ICTSI, Inc.'s operation of its port facilities. This dispute centers around a falling out nearly three decades ago between two Philippine families, one of whom happens to operate a port facilities business." Defs.' Reply 24, ECF #79.
Finally, "judicial efficiency will be served if the parties are only required to litigate this dispute in one jurisdiction. 'Needless duplication of proof and waste of judicial resources [should] be avoided.'" Zhao, 2014 WL 4851666, at *4 (quoting Calavo, 632 F.2d at 968) (alteration in original). Plaintiffs have already commenced related litigation in the Philippines with the estafa case.
On balance, the private and public interest factors strongly outweigh the little deference accorded to plaintiffs' choice of forum. The Philippines is an adequate alternative forum, and the balance of private and public interest factors strongly favor dismissal.
IV. Other Motions
As previously noted, it is within this court's discretion "to respond at once to a defendant's forum non conveniens plea, and [the court] need not take up any other threshold objection" including matters of subject matter jurisdiction or personal jurisdiction. Sinochem, 549 U.S. at 425. Here, the "considerations of convenience, fairness, and judicial economy" warrant resolving forum non conveniens as a threshold, non-merits issue. Id. at 432. If this case is dismissed on forum non conveniens, it renders the remaining motions moot.
RECOMMENDATIONS
Plaintiffs' motion to strike the declaration of defendants' legal expert (ECF #49) should be denied. Foreign defendants' motion to dismiss (ECF #27) should be granted under the doctrine of forum non conveniens, and this case should be dismissed without prejudice. The remaining motions (ECF ##31, 35, 47-48) should be denied as moot.
"Of course, where forum non conveniens is asserted, the proper remedy is a judgment of dismissal without prejudice, not the entry of judgment against the plaintiffs' claims." Nelson v. CGU Ins. Co., No. CIV. 02-193-BS, 2003 WL 1856439, at *2 (D. Me. Apr. 10, 2003), report and recommendation adopted sub nom. Nelson v. CGU Ins. Co. of Canada, 2003 WL 21011353 (D. Me. May 3, 2003) (citing Silva v. Encyclopedia Britannica, Inc., 239 F.3d 385, 386, 388 n.6 (1st Cir. 2001) (affirming dismissal without prejudice)); see also Delgado v. Shell Oil Co., 890 F. Supp. 1324, 1374 (S.D. Tex. 1995), aff'd, 231 F.3d 165 (5th Cir. 2000) ("In general [forum non conveniens] dismissals are without prejudice[.]"). --------
SCHEDULING ORDER
These Findings and Recommendations will be referred to a district judge. Objections, if any, are due Friday, August 30, 2019. If no objections are filed, the Findings and Recommendations will go under advisement on that date.
If objections are filed, then a response is due within 14 days after being served with a copy of the objections. When the response is due or filed, whichever date is earlier, the Findings and Recommendations will go under advisement. // // // //
NOTICE
These Findings and Recommendations are not an order that is immediately appealable to the Ninth Circuit Court of Appeals. Any Notice of Appeal pursuant to Rule 4(a)(1), Federal Rules of Appellate Procedure, should not be filed until entry of a judgment.
DATED August 16, 2019.
/s/ Youlee Yim You
Youlee Yim You
United States Magistrate Judge