Plaintiff Herbstein is a physician, originally from
Argentina but currently a permanent United States resident
domiciled in New York. Herbstein is an officer, director, and
50% shareholder in Imagenes Por Computacion ("IxC"). He is
also listed as a director and 8% shareholder of Altec.
Defendant Bruetman is a physician, originally from
Argentina but now a citizen of Illinois. Bruetman is the
other 50%, shareholder in IxC, and he serves as IxC's
President and Chairman of the Board. Bruetman also indirectly
holds a controlling interest in, and serves as the Director
Defendant Tash is a citizen of Illinois and is a 12.25%
shareholder in High Tech. Tash also serves as the Secretary
and legal counsel for High Tech.
Defendant Agudelo is a citizen of Illinois, and serves as
the controller for High Tech.
Defendant High Tech is an Illinois corporation with its
principal place of business in Illinois. High Tech
specializes in the scientific and technical advising of
medical establishments. It also owns 49%, of Altec stock.
Defendant Kiell is a citizen of Connecticut, and at all
relevant times, he owns 12.25% of High Tech stock. Until
January 1989, he was the President and Chief Financial
Officer of High Tech.
Defendant Altec is an Argentine corporation with functions
similar to High Tech's.
In 1989, Herbstein initiated a civil suit in Argentina
against Bruetman and Amerigo Pescio ("Pescio") seeking: (1)
to remove Bruetman as director of IxC; (2) to remove Pescio
as executive manager of IxC; (3) to declare that Bruetman and
Pescio wrongfully carried out their duties for IxC; (4) to
petition the Argentine court to assign a provisional
administrator for IxC; and (5) to petition the Argentine
court to maintain the status quo on IxC's corporate relations
with the Guemes Foundation (an Argentine non-profit
corporation affiliated with the Guemes Hospital).*fn1
On August 22, 1989, the lower court in Argentina denied
Herbstein's motions, reasoning inter alia, that IxC's by-laws
should govern the internal affairs of the corporation. Then on
September 28, 1989, the Argentine appeals court suspended IxC's
board and granted Herbstein's request for a provisional
administrator. However, the appeals court refused to accept
Herbstein as a "victim" of the alleged wrongdoing, so that he
was found not personally eligible to recover damages if
wrongdoing was eventually discovered.*fn2 In view of these
measures, the court found the petition to retain the status quo
At approximately the same time Herbstein instituted the
above action, Bruetman brought a second Argentine suit, a
civil/criminal suit on behalf of himself and IxC, requesting
an investigation of several people, including Herbstein, to
determine their responsibility in IxC's "accounting
irregularities." Bruetman sought the status of victim, but
the Argentine appeals court also refused his request. The
Argentine appeals court held that Bruetman's individual suit
was not proper, but that IxC had a legitimate interest in the
investigation. Shortly thereafter, Bruetman filed a criminal
slander suit against Herbstein. In addition, High Tech filed
a complaint against IxC seeking compensatory damages for
breach of contract.
Herbstein filed the present suit on October 16, 1989. The
Bruetman defendants filed this motion on January 17, 1990,
oral argument was heard on April 27, 1990 and the motion was
considered fully submitted on that date.
In late 1986 or early 1987, Herbstein and Bruetman began
discussing the possibility of investing in a sophisticated
medical diagnostic center to be established in Buenos Aires,
Argentina. According to Bruetman's proposal, the center would
provide its services to the Guemes Hospital in Buenos Aires.
Herbstein and Bruetman thereafter negotiated, by both mail
and telephone, the details of the business venture. The
parties dispute whether Bruetman met Herbstein in New York to
discuss the transaction.
In April 1987, Herbstein began sending payments to Bruetman
through the mail or through wire transfers to begin
establishing the proposed company. Herbstein also claims to
have given Bruetman cash in New York to be used for the
venture. By June 1987, Alta Tecnologia Medica S.A.
("Altec-1") was incorporated in Argentina. Bruetman became
the President, Chief Executive Officer, and Chairman of the
Board. Herbstein became Vice President; both men were equal
owners of the company.
By July 1987, Herbstein's payments to Altec-1 totalled
approximately $447,000,*fn3 part of which was paid directly
to Altec-1's bank account in Argentina. According to
Herbstein, these funds were intended as a capital
contribution to the business, in exchange for which Herbstein
was to be given 50% of Altec-1's stock.
By August 1987, Altec-1 had entered into an agreement with
the Guemes Foundation to import, install, and operate medical
equipment purchased from Philips Export B.V. ("Philips"). In
exchange for Altec-1's services, it would receive a portion
of the revenue generated from the use of the machines.
However, by late 1987, Herbstein alleges that he discovered
that Bruetman through Altec-1 was conducting business
unrelated to the Guemes Hospital services. These other
transactions apparently benefitted Bruetman and High Tech.
Consequently, Herbstein and Bruetman agreed to reform the
corporation: Altec-1 was re-named Imagenes Por Computacion
("IxC"), and Bruetman formed a new business venture which was
also named Alta Tecnologia Medica S.A. (hereinafter "Altec").
High Tech owned 49% of Altec stock; Bruetman's son Carlos
held 43%, and Herbstein held 8%.
Herbstein has now lodged several claims with this court
against different combinations of defendants. The claims are
both complicated and detailed, and at this stage of the
proceedings, it is not necessary to examine the facts of all
of his claims in depth.
Herbstein alleges that Bruetman fraudulently represented in
New York that all money transferred by Herbstein would be
used to fund Altec-1 operations. The funds, according to
Herbstein, were used to benefit Bruetman and High Tech.
Moreover, Herbstein alleges that when IxC was formed,
Bruetman promised Herbstein in New York that he would be
credited with all his capital contributions to Altec-1.
Herbstein claims that he has not been fully credited for all
his contributions. Herbstein also alleges that several
defendants, or combinations of defendants, sent letters to
him in New York which misrepresented both IxC's financial
status and Herbstein's obligations to Altec and High Tech.
The Supreme Court has defined comity as:
the recognition which one nation allows within
its Territory to the legislative, executive, or
judicial acts of another nation, having due
regard both to international duty and
convenience, and to the rights of its own
citizens or of other persons who are under the
protection of its laws.
Hilton v. Guyot, 159 U.S. 113, 164, 16 S.Ct. 139, 143, 40 L.Ed.
The general rule of comity is that the domestic court
should exercise jurisdiction
concurrently with the foreign court. China Trade & Dev. Corp.
v. M.V. Choong Yong, 837 F.2d 33, 36 (2d Cir. 1987); Laker
Airways Ltd. v. Sabena, Belgian World Airlines, 731 F.2d 909,
926-27 (D.C. Cir. 1984). If a judgment is reached first in the
foreign court, it can then be pled as res judicata in the
domestic court. See China Trade, at 36. Without a final
judgment from another court, surrender of jurisdiction is
justified only under exceptional circumstances. Moses H. Cone
Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 25-26, 103
S.Ct. 927, 941-942, 74 L.Ed.2d 765 (1983).
The Argentine courts have not reached a final decision that
can be pled as res judicata here. The Argentine proceedings are
in their preliminary stages: a provisional administrator has
been appointed and an investigation into possible
misappropriation is now underway. There has not yet been any
determination of actual wrongdoing by any of the defendants
named in either the Argentine or American complaints.
Consequently, this court may not properly dismiss Herbstein's
complaint of wrongdoing absent a showing of exceptional
circumstances not shown here.
Moreover, comity requires that the parties and issues in
both litigations are the same or sufficiently similar, such
that the doctrine of res judicata can be asserted. China Trade
& Dev. Corp. v. M.V. Choong Yong, 837 F.2d at 36; Black &
Decker Corp. v. Sanyei Am. Corp., 650 F. Supp. 406, 409
(N.D.Ill. 1986). Here, neither the parties nor the issues are
identical or significantly similar.
Herbstein's Argentine complaint named Bruetman and Pescio
for alleged misappropriation of corporate funds. By contrast,
the American complaint names Bruetman, Tash, Kiell, High
Tech, Altec, and Agudelo as defendants. Moreover, the instant
complaint does not deal specifically with the alleged
misappropriation but alleges that the Bruetman defendants
fraudulently induced Herbstein to invest in the Argentine
ventures. The complaint describes the alleged
misappropriation in detail only to highlight that the funds
allegedly were not being used for the purposes the Bruetman
defendants represented to Herbstein. In essence, then, the
Argentine proceeding is equivalent to a shareholder
derivative suit, while the American proceeding is a claim for
misrepresentation — two independent causes of action. In the
Argentine suit the corporation stands to gain and Herbstein
perhaps only derivatively. In the present suit, it is Herbstein
individually who seeks restitution for an alleged wrongdoing.
Finally, the Bruetman defendants incorrectly assert that
Brinco Mining Ltd. v. Federal Insurance Co., 552 F. Supp. 1233
(D.C. 1982), controls the instant case. The Brinco Court based
its decision to dismiss on two primary factors: (1) desire to
avoid duplicative litigation, and (2) the "first to file" rule.
Id. at 1241.
As explained above, Herbstein's action does not replicate
his Argentine litigation, and each case incorporates
different alleged wrongdoings. Moreover, while Herbstein did
file first in Argentina, he did so on an independent legal
basis. Herbstein acted so that both he and IxC would qualify
as "victims" of the alleged misappropriation. There has not
been any Argentine filing of a charge of misrepresentation, and
therefore the "first to file" rule does not apply. See id. at
1241. Herbstein did reserve his rights to seek compensatory
damages for Bruetman's alleged wrongdoings merely to prevent
the statute of limitations from expiring in Argentina. It was a
"prudent" measure to ensure that Herbstein would be able to
recover some damages in the event that his planned suit in the
United States was dismissed on procedural grounds. Such
prudential filings cannot provide the basis for a finding of
"duplicative litigation." Department of Economic Dev. v. Arthur
Andersen & Co., 683 F. Supp. 1463, 1485 (S.D.N.Y. 1988).
Defendants' motion for dismissal on the grounds of comity is
II. Forum Non Conveniens
The plaintiff's choice of forum should only be disturbed if
the balance of factors strongly favors the defendants.
Piper Aircraft Co. v. Reyno, 454 U.S. 235, 255, 102 S.Ct. 252,
265, 70 L.Ed.2d 419 (1981); Gulf Oil Corp. v. Gilbert,
330 U.S. 501, 508, 67 S.Ct. 839, 843, 91 L.Ed. 1055 (1947). In fact, a
district court should dismiss on a forum non conveniens ground
only where a trial in the United States would be "unjust,
oppressive, or vexatious" and not merely inconvenient for the
defendant. Koster v. (American) Lumbermens Mutual Casualty Co.,
330 U.S. 518, 524, 67 S.Ct. 828, 831, 91 L.Ed. 1067 (1947);
American Home Assur. Co. v. Insurance Corp. of Ireland, Ltd.,
603 F. Supp. 636, 640 (S.D.N.Y. 1984).
The Court in Gulf Oil set out both the private and public
interest factors to consider in a forum non conveniens motion.
The private factors include: the relative ease of access to
sources of proof, the availability of compulsory process for
unwilling witnesses, the cost of obtaining attendance for
willing witnesses, and other practical problems that could make
the trial protracted, difficult, or costly (e.g., application
of foreign law, translation of documents), 330 U.S. at 508, 67
S.Ct. at 843. The public interest factors include: the
administrative difficulties resulting from a backlog of
litigation in the district, and the imposition of jury duty on
a district having no relation to the litigation. 330 U.S. at
508-09, 67 S.Ct. at 843.
The private interest factors weigh in favor of Herbstein.
As an officer, director, and 50% shareholder, Herbstein can
obtain the relevant corporate documents from IxC. Moreover,
since Herbstein alleges misrepresentation in the United
States through mail and wire fraud, most of the documents are
in fact already in Herbstein's possession in the United
States. In addition, the misrepresentation allegedly occurred
in New York, most of the witnesses relevant to establishing
Herbstein's allegation of misrepresentation will also be
located in New York or in the United States, where they are
subject to compulsory service of process. Only one of the
defendants is from Argentina and most of the actions
constituting the alleged misrepresentation occurred at least
partly in the United States. Moreover, the Bruetman
defendants have not indicated that any of the likely
Argentine witnesses would not be willing to testify in the
The practical problems with respect to a trial in this
district are the possible need for translations of Argentine
documents, and the possible application of Argentine law to
parts of the litigation. Some of the Argentine documents
relevant to his complaint here deal with the alleged transfer
of funds to unauthorized corporations or individuals.
However, the translation required for this trial would not be
so overwhelming as to justify dismissal of the case.
Furthermore, defendants' inconvenience argument is
unpersuasive. The Bruetman defendants, with one exception,
are Illinois residents. It will be equally difficult for the
Argentine court to obtain translated evidence/testimony from
English-speaking Tash, Kiell, and Agudelo, who will
undoubtedly be called as witnesses in the Argentine
proceedings. See Carlenstolpe v. Merck & Co., 638 F. Supp. 901,
907 (S.D.N.Y. 1986).
Even if this court decides that it must apply Argentine law
to the claims, this choice of law alone cannot support a
forum non conveniens dismissal where the other factors weigh in
favor of the plaintiff's choice of forum. Gibbons v. Udaras na
Gaeltachta, 549 F. Supp. 1094, 1123 (S.D.N.Y. 1982).
The public interest factors also weigh in Herbstein's
favor. A case may not be dismissed simply because New York is
a congested center for litigation, and defendants made no
showing that New York is prohibitively congested.*fn4
Moreover, the United States courts have a definite relation
to the litigation, when a fraud allegedly is perpetrated
against one of its residents. The United States has a
definite interest in correcting wrongs committed on its soil,
and in deterring similar actions by other individuals and
Argentine forum is not convenient nor is litigation in this
forum unjust or oppressive so as to merit dismissal on a
forum non conveniens ground.
III. Motion to Stay
"[A] stay is as much a refusal to exercise
federal jurisdiction as a dismissal. When a
district court decides to dismiss or stay . . .
it presumably concludes that the parallel . . .
litigation will be an adequate vehicle for the
complete resolution of the issues between the
Moses H. Cone Memorial Hospital v. Mercury Constr. Corp., 460
U.S. at 28, 103 S.Ct. at 943; Ingersoll Milling Machine Co. v.
Granger, 833 F.2d 680, 683-86 (7th Cir. 1987) (trial court
properly denied stay motion where parallel proceedings underway
in Belgium; stay properly granted later only because judgment
in Belgian case found to adjudicate all rights between
parties). The Argentine litigation, for the reasons stated
above, will not provide complete resolution of the issues
underlying the instant complaint.
Furthermore, where a foreign litigation is still in its
preliminary stages, motions to stay must be denied.
I.J.A., Inc. v. Marine Holdings, Ltd., 524 F. Supp. 197, 199
(E.D.Pa. 1981). This is especially required where the claims
and parties are not identical, since the plaintiff will merely
reinstate those additional claims after obtaining a judgment in
the foreign case. I.J.A., Inc. v. Marine Holdings, Ltd., 524
F. Supp. at 199. Herbstein's action against Bruetman and Pescio
is still in its earliest stages and the Argentine legal system
has not concluded its investigation of the alleged
misappropriations. Moreover, if a stay were granted, Herbstein
would be forced merely to wait to pursue those claims that
differ from those asserted in Argentina.
Accordingly, the Bruetman defendants' motion for dismissal
or stay is denied. Settle order on notice.
It is so ordered.