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Click here for the full text of this decision The district court abused its discretion in accepting the Mexican court’s ruling under principles of comity. FACTS:International Transactions Ltd. challenges the dismissal of its action to confirm an arbitration award against Embotelladora Agral Regiomontana, S.A. de C.V.; Embotelladora Agral De La Laguna, S.A. de C.V.; Agral Arrendadora, S.A. de C.V.; Agral Comisionista Y Distribuidora, S.A. de C.V.; and Agral Immobiliaria, S.A. de C.V. (the “Agral Companies”). The district court dismissed the case based on its conclusion that ITL lacked standing to collect the arbitration award based on an order of a Mexican bankruptcy court in the insolvency proceedings of several of the Agral Companies. The Mexican bankruptcy court held that ITL’s representative, Sharp Capital Inc., had assigned the award to a third party and Sharp had released any interest it held in the award. The district court concluded that this decision was entitled to comity and required dismissal of ITL’s claims for lack of standing. HOLDING:Vacated and remanded. Under principles of international comity, a foreign court’s judgment on a matter is conclusive in a federal court when 1. the foreign judgment was rendered by a court of competent jurisdiction, which had jurisdiction over the cause and the parties; 2. the judgment is supported by due allegations and proof; 3. the relevant parties had an opportunity to be heard; 4. the foreign court follows procedural rules; and 5. the foreign proceedings are stated in a clear and formal record. Hilton v. Guyot, 159 U.S. 113 (1895). Comity is an affirmative defense and the parties urging comity � the Agral Companies in this case � have the burden of proof on the issue. Although ITL challenges the district court’s decision on comity on several grounds, the critical question is whether ITL had notice and an opportunity to be heard in the Mexican bankruptcy court on its claim to the Award. Answering that question requires an analysis of what type of notice is required for this purpose. There is no dispute that ITL had notice of the Agral bankruptcy, actual and constructive, through its agent Sharp. The Agral Companies argue that because ITL had notice of their bankruptcy proceeding, ITL cannot complain of lack of notice because it failed to file a claim. The court disagrees. Although ITL did not file a claim for the Award under its own name, it clearly did file a claim in the Agral bankruptcy through its agent, Sharp. Even though neither Sharp nor ITL was given notice of the motion, the district court appeared to charge ITL with notice because ITL was aware of the pendency of the bankruptcy proceedings in which the motion was filed. ITL contends that it (either through Sharp or directly) was entitled to notice of the particular motion to dismiss Sharp’s attorney as provisional intervenor based on Sharp’s assignment of the award. ITL’s position is more consistent with the court’s concept of due process and with case law on this issue. U.S. bankruptcy law speaks of notice to parties in interest in terms of notice of particular proceedings within the larger bankruptcy proceeding of the debtor. For example, Bankruptcy Rule 3007 fixes requirements for notice of an objection to a claim. The court concludes that, having filed a claim in the Agral bankruptcy proceeding, ITL or Sharp was entitled to notice of the motion to replace Sharp’s attorney as provisional intervenor because a decision on that motion clearly would affect ITL’s claim in the bankruptcy. The court does not discuss the precise level of due process required to be given to ITL, as the record does not indicate that any notice was given. There’s nothing in the record, the district court’s opinion or any of the briefs which supports a conclusion that this motion was not handled on an ex parte basis. The court fully accepts that ITL would be bound by notices issued in the bankruptcy proceeding to its agent, Sharp, and that ITL’s obligation to act to preserve its rights did not stop with the filing of the claim by Sharp. No later than November 1998, ITL should have been on notice that Sharp could no longer be trusted to advance its interests since the SEC had appointed a special master to oversee Sharp’s affairs. ITL also had some notice, though perhaps not timely, of the January 1999 ruling in which the Mexican court denied Sharp’s claim for lack of proof. In its Motion to Dismiss filed in this case in July 2001, the Agral Companies stated that “[t]he Mexican insolvency court has already ruled on Sharp Capital’s application for enforcement of the arbitral award at issue here,” referring to the January 1999 ruling on Sharp’s claim. There is no indication in the record that ITL took any action in response to these facts to protect its claim before the Mexican bankruptcy court, for example by withdrawing Sharp’s authority to act on its behalf or to substitute an alternative representative. However, based on the record before us, the court cannot determine that any lack of diligence by ITL had any affect on the failure of the Mexican court to give notice of the motion to Sharp. The Mexican court apparently signed the order removing Sharp as provisional intervenor ex parte without giving notice of GEN’s motion to any interested party. Accordingly, the Agral Companies have failed to meet their burden of proof that ITL was afforded an opportunity to be heard in the Mexican court on the issues underlying the motion to dismiss Sharp as intervenor that the Agral Companies seek to enforce in this court. In these circumstances, the court concludes that the district court abused its discretion in accepting that ruling under principles of comity. OPINION:Davis, J.; Davis, Smith and Duhe, JJ.

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