Appeal from a judgment of the United States District Court for the Southern District of New York, Charles S. Haight, Jr., Judge, 500 F. Supp. 787, dismissing action for breach of contract and breach of fiduciary duty on grounds of forum non conveniens. Affirmed.
Before Kaufman and Kearse, Circuit Judges, and Maletz,*fn* Judge, United States Court of International Trade.
Plaintiff-appellant Panama Processes, S.A. ("PPSA") appeals from a judgment of the United States District Court for the Southern District of New York, Charles S. Haight, Jr., Judge, conditionally dismissing on grounds of forum non conveniens PPSA's action seeking damages and injunctive relief for breach of contract and breach of fiduciary duty by defendant Cities Service Company ("Cities"). Because we find no abuse of the district court's discretion, we affirm.
The present lawsuit concerns the conduct since 1965 of the affairs of a Brazilian corporation, Copebras, S.A., 30.31% of whose stock is owned by PPSA, with the remaining 69.69% currently owned by Citco do Brasil Industria a Comercio Ltda. ("Citco do Brasil"), a company owned by two Delaware subsidiaries of Cities. In 1965 Copebras had three shareholders: PPSA, a Cities subsidiary called Columbian Carbon Company ("Columbian") which was subsequently merged into Cities, and Celanese Corporation ("Celanese"). In that year Celanese sought to sell its shares, and the three shareholders agreed that Celanese's interest would be purchased by Copebras, leaving Columbian with 69.69% of the outstanding stock and PPSA with the remainder. PPSA, however, was concerned that Columbian might cause Copebras to reinvest its income rather than paying dividends. As the price of agreeing to Copebras's purchase of the Celanese interest, therefore, PPSA obtained agreement from Columbian in a letter dated September 7, 1965 (the "1965 Agreement"), endorsed by PPSA, stating in part as follows:
In the event Columbian Carbon Company (Columbian) attains a majority position in the stock interest of Companhia Petroquimica Brasileira (Copebras), you as a minority shareholder have expressed your concern as to the dividend policy Columbian would adopt.
It must be recognized that future policy of this kind may be affected by the industrial, fiscal, and political situation in Brazil, and that the corporate objectives and competitive position of Copebras may change from time to time.
It is definitely the intention of Columbian after due consideration of the above factors to cause Copebras to declare dividends, insofar as it may legally do so, to the extent of at least 50% of each year's net income after taxes.*fn1
The complaint, filed in 1979,*fn2 alleges that during the period 1965-1978 Cities breached the 1965 Agreement and breached its fiduciary duty as majority shareholder of Copebras, by employing a variety of "manipulative" accounting devices and expanding the Copebras business in such a way as to benefit Cities while avoiding the payment of dividends to Cities and PPSA. In part, PPSA contends that Cities caused Copebras to adopt an accelerated depreciation accounting method for its Brazilian financial statements, thus lessening Copebras's earnings from which dividends could be paid. PPSA seeks judgment declaring that Cities has breached the 1965 Agreement, awarding monetary damages in an amount equal to the dividends that would have been paid but for the contractual and fiduciary breaches, and enjoining Cities from taking any future action in the conduct of Copebras's affairs to depress Copebras's "true economic earnings or the true value of the shareholders' equity in Copebras and from otherwise preventing the payment of properly computed cumulative dividends."
Cities moved for dismissal of the action on the ground of forum non conveniens,*fn3 advancing a number of arguments to show that New York is an inappropriate forum. These included the facts that PPSA is a Panamanian corporation with its principal place of business in London, and is not authorized to do business in New York, and that the only present contact of New York with the controversy is the current residence in New York of PPSA's chief executive officer; that Cities is a Delaware corporation whose principal place of business, although in New York until 1974, is currently in Tulsa, Oklahoma; that Cities has in New York just six employees, none of whom has knowledge relevant to this dispute; that Cities has no relevant documents in New York; that Copebras is a Brazilian corporation that does no business in the United States; that Citco do Brasil similarly neither does business nor is authorized to do business in the United States; that Copebras's books and records are in Brazil and cannot lawfully be removed from Brazil; that those books and records are in the Portuguese language and would have to be translated for an American jury; and that Brazilian law would govern the question of what fiduciary responsibility a majority shareholder such as Citco do Brasil has to a minority shareholder such as PPSA. Finally, Cities argued that there is no genuine issue as to what accounting methods or business operations Copebras undertook, nor as to the fact that Cities controlled Copebras; but Cities would expect to show that economic, industrial, and political conditions in Brazil from 1965 through 1978 were such as to justify, within the contemplation of the 1965 Agreement, any actions taken by Copebras at the behest of Cities. Cities argued that all of these factors, plus the consideration that the injunctive relief sought by PPSA would require continuing judicial supervision over Copebras's operations and fiscal affairs, make it appropriate for the present action to be pursued in Brazil and not in New York. As a condition to dismissal on this ground, Cities offered to submit to the jurisdiction of the courts of Brazil.
PPSA, in opposition to the motion, pointed out, inter alia, that the 1965 Agreement and the other agreements leading to Copebras's purchase of Celanese's stock were executed in New York and that Cities had then been headquartered here; that many of the meetings of one of Copebras's governing bodies had been conducted in New York; that the Brazilian courts provide more limited discovery than do United States courts; and that PPSA's claims depend strictly on actions taken by Cities in the United States, not on Copebras's own acts or on conditions in Brazil.*fn4
The District Court's Decision
In a thorough opinion, reported at 500 F. Supp. 787, the district court reviewed the pertinent principles set forth in the leading forum non conveniens cases, including Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S. Ct. 839, 91 L. Ed. 1055 (1947) ("Gilbert"); Alcoa Steamship Company v. M/V Nordic Regent, 654 F.2d 147 (2d Cir.) (en banc), cert. denied, 449 U.S. 890, 101 S. Ct. 248, 66 L. Ed. 2d 116 (1980) ("Alcoa"); Schertenleib v. Traum, 589 F.2d 1156 (2d Cir. 1978) ("Schertenleib"); and Farmanfarmaian v. Gulf Oil Corp., 588 F.2d 880 (2d Cir. 1978) ("Farmanfarmaian"). As set forth in greater detail below, the court evaluated the prospects of the parties for a fair adjudication of the claims in the alternative forums, as well as such "public interest" factors as the remoteness of the forum from the center of the controversy, and the ease or difficulty of judicial enforcement of an eventual judgment, and concluded that New York is not, and Brazil is, an appropriate forum for this action.
First, the court recognized that political, industrial, and economic circumstances in Brazil since 1965 will have had an effect on the parties' substantive contractual rights:
Clearly, the reasons underlying the manner of Copebras' accounting, expansion, and dividend policies are important to the resolution of these disputes. It will be recalled that Columbian's undertakings in the September 7, 1965 letter, in respect of dividend policy and plant expansion, were preceded by the caveat that the parties must recognize "that future policy of this kind may be affected by the industrial, fiscal, and political situation in Brazil, and that the corporate objectives and competitive position of Copebras may change from time to time." In its present complaint, at P 18, Panama specifically alleges that during the period from 1965 through 1978, "there has been no change in the Brazilian economic, political or fiscal conditions sufficient to justify a failure to declare the cumulative dividends required by the September 7 agreement."
500 F. Supp. at 793. Whether there have been material changes as Cities contends, or no such changes, as PPSA contends, must therefore be determined. Id. at 797. Against this Brazilian background, the court observed the need to evaluate the actions and competitive interests of a Brazilian corporation that does business only in Brazil:
The disputes between Panama and Cities arise directly out of the operations of Copebras. Furthermore, the parties recognized in the September 7, 1965 letter that Cities' future policy obligations in respect of dividends "may be affected by the industrial, fiscal, and political situation in Brazil," as well as changing "corporate objectives and competitive position of Copebras." The letter agreement does not undertake to further define these considerations, or to lay down ground rules for Cities' response to them, other than providing, in the next paragraph of the letter, that the majority stockholder give "due consideration of the above factors"; but it is entirely clear that Brazilian affairs in general, and Copebras' affairs in particular, inform and shape the parties' rights and obligations under the letter agreement.
Id. at 795.*fn5 Most of the proof as to the Brazilian history and political conditions, and of Copebras's own competitive situation would necessarily come from Brazil:
If the case is tried here, it is clear that even assuming the parties' contractual rights are governed by New York law, Brazilian facts and law are inextricably involved. The existence vel non of significant developments in the "industrial, fiscal, and political situation in Brazil," upon which Cities' obligations under the September, 1965 agreement are conditional, would require a New York jury to first comprehend and then evaluate the last 14 years of that nation's volatile economic and social history. Comparable complexities of proof arise with respect to "the corporate objectives and competitive position of Copebras" within the Brazilian economy, another circumstance upon which Cities' obligation on dividends is conditional. Proof of these underlying circumstances must come primarily from Brazil.
The impact of Cities' decisions upon Copebras, also depends primarily upon Brazilian evidence. The corporate books of account are kept in Portuguese, in accordance with the advice of Brazilian accountants whose practices apparently differ in certain respects from those in this country. Cities' Brazilian attorney states that "under the laws of Brazil it would be unlawful to remove the books of account of Copebras from the country." Assuming that this practical problem may be solved by the reproduction and certification of copies, the fact remains that a New York jury would be confronted with 14 years of corporate "sonnets from the Portuguese" requiring translation. It is reasonable to assume that many documents will be in Portuguese. This is a significant forum non conveniens factor: "More to the point, most of the pertinent documents relevant to the underlying dispute are in French. The expense of translation, which is potentially substantial, would be totally avoided if trial is in Geneva." Schertenleib, supra, 589 F.2d at 1165.
Of course, documents in English evidencing Cities' decision-making processes as majority shareholder of Copebras would presumably have to be translated into Portuguese for the benefit of a Brazilian judge; and American witnesses, including Panama's Mr. Michaan, who sat on the Copebras Consultative Board and has access to at least some of those documents, would have to testify in Brazil. But it appears clear that, given the chronological, geographic, economic and social considerations which underlie the disputes between these parties, the bulk of the pertinent evidence is to be found in Brazil.
In addition, the court noted that at least the claim of breach of fiduciary duty would be governed by Brazilian law,*fn6 the thrust of which differs ...