Deciding whether to litigate in Mexico or in US courts deserves thorough analysis. There is no "clear cut" rule. One of the key factors to consider is which court constitutes adequate forum, as the action may be otherwise dismissed. To understand what constitutes adequate forum, the parties must familiarize themselves with the doctrine of forum non conveniens.
The doctrine of forum non conveniens is a judicial doctrine permitting a US federal district court to dismiss an action where a court abroad is the more appropriate and convenient forum for adjudicating the controversy. It permits a US court to dismiss an action that is properly before it, even if the alternative forum has less favorable substantive law, the alternative forum has less favorable procedural law, or the array of remedies in the alternative forum is less than in the federal forum, if: (a) an adequate alternative forum exists in another country and (b) the balance of the relevant private and public interest factors favors dismissal.
A foreign forum may be found to be inadequate if: the litigation cannot proceed; the defendant is not amenable to service of process in the alternative forum, though the defendant can remedy this by submitting to personal jurisdiction; no remedy is available to the plaintiff; the plaintiff fears retaliation if he or she goes to the alternative forum; egregious litigation delays exist in the alternative forum's judicial system; the plaintiff is unable to join a necessary third party in the alternative forum. When the court has doubts about the adequacy of the foreign forum, the court should condition dismissal on the foreign court's acceptance of the case.
Once the adequacy of an alternative foreign forum has been established, the court must balance the private and public interests to determine whether the convenience of the parties and the ends of justice would best be served by dismissing the action. Private interest factors include: (a) the ease of access to sources of proof; (b) compulsory process to obtain the attendance of hostile witnesses; (c) cost of transporting friendly witness; and (d) other problems that interfere with an expeditious trial. The public interest factors that need to be considered include: (a) judicial administrative difficulties; (b) the burden of jury duty on the community; (c) the local interest in adjudicating the matter; and (d) the avoidance of unnecessary conflict of law problems associated with having a forum apply foreign law.
In Loya, 583 F.3d at 664, for instance, the court concluded that Mexico provided an adequate forum despite the less generous remedies available there for the same type of action because the defendants agreed to accept service in Mexico, submit to Mexican jurisdiction and waive any statute of limitations defenses.
More recently, in DB Mexican Franchising LLC v. Cue, the United States District Court for the Southern District of California, granted defendant’s motion to dismiss proceedings under the common law doctrine of forum non conveniens. This case derived from a Multiple Unit Development and Franchise Agreement entered into DB Mexican franchising, a Delaware corporation registered to do business in Mexico and Panera El Roble S.A. de C.V., a company organized and existing under the laws of Mexico, which established a franchise relationship between the parties for operation of Dunkin' Donuts shops in Mexico. Cue was a shareholder of Panera and personal guarantor under the franchise agreement.
In his motion, defendant argued that the franchise agreement was negotiated and signed in Mexico by parties intending to do business in Mexico, that all relevant documents and witnesses were located in Mexico, and that a vast majority of Defendant's personal assets were located in Mexico, rendering the enforcement of any judgment easier than if entered here. The court agreed, finding that private interest factors favored Mexico as the more appropriate forum for this dispute.
The public interest factors considered in this case were: (a) judicial administrative difficulties; (b) the burden of jury duty on the community; (c) the local interest in adjudicating the matter; and (d) the avoidance of unnecessary conflict of law problems associated with having a forum apply foreign law. Defendant contended these factors also favored Mexico as the appropriate forum, explaining that this case involved a contract dispute between Mexican national and a Delaware corporation that regularly does business in Mexico. In addition, defendant pointed out the agreement was negotiated and signed in Mexico. Defendant also contended Mexico had a compelling public interest in the resolution of this lawsuit because plaintiff's registration as a foreign branch in Mexico subjected it to the laws of Mexico and the underlying business and transactions giving rise to this dispute occurred in Mexico. Defendant further suggested this action "should be handled in the venue where the Guaranty was 'negotiated,' and where there is familiarity with the applicable Mexican law."
The court noted the dispute concerned the enforcement of the guaranty which clearly was drafted in Mexico and signed in Mexico, and that plaintiff was registered to do business in Mexico and, as such, was subject to Mexican law in transacting business. Simply because the contract dispute in this case involved a guaranty that was executed in Mexico between a Mexican national and a Delaware corporation doing business in Mexico, this Court found that Mexico had considerably more public interest in the outcome of this case. Consequently, the court also found the public interest factors to weigh in favor of dismissal.
To prevent these conflicts, parties shall use carefully drafted dispute resolution provisions, taking into account the public and private interest factors mentioned above. Using boilerplate provisions or selecting the “home forum” without deep thought and thorough analysis shall be avoided.