Foreign Judicial Corruption and Foreign Non Conveniens

The Seventh Circuit last week rendered the most unusual foreign non conveniens decision I have ever read. The case presents a cautionary tale about the impact that foreign judicial corruption can have on domestic litigation.

Mañez v. Bridgestone Firestone involved a tort action against Bridgestone Firestone filed in Indiana after José Samuel Mañez-Reyes died in a “rollover” car accident in Veracruz, Mexico. The district court dismissed the action based on forum non conveniens. But the surprising twist came when the Mexican court ruled that it did not have jurisdiction over the case, despite the fact that Mañez-Reyes’ death occurred there. If the Mexican court could not hear the case, this opened the door to return the case to the Indiana federal court. Smelling something fishy, Bridgestone raised serious questions as to the Mexican court’s actions. The district court conducted an evidentiary hearing, and concluded that dismissal by the Mexican court was procured by fraud. The court fined the plaintiffs $50,000, and fined one attorney in particular, Leonel Pereznieto, $100,000.

On appeal one of the key questions was whether the fraud was perpetrated against the federal district court, such that it had jurisdiction to impose fines.

The district court found that the evidence, including a “smoking gun” email sent on January 14, 2005, showed that the Mexican attorneys improperly had used family connections and had ex parte contact with the Morelos judge in order to manipulate the system and ensure that the judge would “throw out the suit according to what we planned.” Pereznieto, the court found, had “played a double role in this attempted fraud on the court,” both by orchestrating the proceedings in Morelos and by submitting an “expert affidavit” to the Seventh Circuit in support of the plaintiffs’ arguments while the initial appeal was pending. At no time did Pereznieto disclose the circumstances of the Mexican proceedings to the U.S. courts, nor did he mention that he was representing the plaintiffs on a contingent-fee basis in Mexico (in itself, a lawful arrangement) while at the same time giving sworn statements as an expert in the U.S. proceedings. These findings provided the basis for the sanctions order we set forth above.

But the Seventh Circuit refused to focus on corruption in Mexico and limited the court’s authority to the fraud perpetrated against the district court.

Finally, we consider the question whether the district court had any authority to evaluate Pereznieto’s actions before the Mexican courts, apart from anything he reported back to the U.S. lawyers or courts. We think not (and, indeed, the district court may not have meant to do any such thing). Whether the proceedings in Morelos were conducted in an honest and upright manner is a matter for the Mexican judicial and bar authorities, not for us. We are not in a position to draw any conclusion, positive or negative, even though we are aware that the problem of corruption within the judicial sector is one that plagues scores of countries around the globe…. We therefore focus only on Pereznieto’s actions that were directed toward the proceedings in the United States.

Thus, because Pereznieto played the double role, the district court had the authority to sanction him. Had he simply fraudulently procured the dismissal of the Mexican court action, the Seventh Circuit seems to preclude the possibility that the district court could impose fines against him. (This conclusion strikes me as odd, because the fraud was directed at the federal district court by removing the Mexican court as an available forum.) But regardless, the case highlights how foreign judicial corruption can impact the proper functioning of forum non conveniens in transnational litigation.