Anti-suit injunctions split circuits

A Florida federal court has blocked a Costa Rican distributor from taking legal action against a multinational company outside of the United States. The case involves the touchy topic of American courts barring proceedings in foreign courts through anti-suit injunctions, which has caused a divide in the circuit courts. A fact which is leading some lawyers to believe it is bound to reach the U.S. Supreme Court.

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A Florida federal court has blocked a Costa Rican distributor from taking legal action against a multinational company outside of the United States, the latest example of an issue some lawyers believe will reach the U.S. Supreme Court. The case involves the touchy topic of American courts barring proceedings in foreign courts through anti-suit injunctions, which has caused a divide in the circuit courts. “As we continue to move toward a global economy and commercial trade and international trade continue to expand, this screams out for the U.S. Supreme Court to set a standard for anti-suit injunctions,” said Michael Diaz Jr., the managing partner of Miami’s Diaz, Reus, Rolff & Targ who helped secure the anti-suit injunction. The case is another example of what lawyers say is an increasingly common problem multinational companies face in Latin America. Local laws and a legal climate that does not honor contracts to the extent American courts do can make multinationals vulnerable when disputes arise, they said. The Florida case originated after Canonlat � as Canon Inc.’s Latin American operation is called � terminated Lantech as its Costa Rican distributor of photocopiers and related products due to delinquent payments. Lantech then sued the company in Costa Rica. Circuits are split After unsuccessfully trying to bring the case to the United States, Canonlat succeeded in stopping Lantech from taking legal action in Costa Rica when a Florida judge issued an anti-suit injunction in a summary judgment on July 18. Canon v. Lantech, No. 05-20297-CIV (S.D. Fla.). The court took the liberal approach taken by 5th, 7th and 9th U.S. circuit courts of appeals. A more conservative approach, which makes getting an anti-suit injunction more difficult, has been seen in the 2d, 3d, 6th and D.C. circuits. The 1st Circuit has applied a mixed approach. Scott Burr, a partner at Diaz, Reus, Rolff & Targ who worked with Diaz on the case, said he believes that the U.S. Supreme Court will eventually rule on anti-suit injunctions. “It most likely would take a review of this case because there is a conflict among the circuits,” he said. Lantech is appealing the injunction to the 11th Circuit, said its lawyer, Traci Rollins, a partner in the West Palm Beach, Fla., office of Squire, Sanders & Dempsey. Lantech already appealed a preliminary anti-suit injunction last year. Oral arguments are set for October. “Under the present ruling from Magistrate [Stephen] Brown, companies that are in other countries will not be able to avail themselves to their statutory and constitutional rights under those countries’ laws if the court gives credence to a forum selection clause without respect for comity,” Rollins said, referring to the principle of nations respecting other nations’ courts. In their agreement, the companies said any disputes would be settled under Florida’s laws. But in court documents, Lantech cited a Costa Rican law that says the jurisdiction of Costa Rican courts and the distributor’s rights cannot be waived. Lawyers representing multinationals warned about such local laws in Latin America, but Rollins defended the need for them. “These countries enacted what’s often called protectionist legislation because it was believed they needed to have some protection against a more sophisticated U.S. company who’s doing business with a small distributor,” she said. Not the final word David Zaslowsky, a partner in the New York office of Baker & McKenzie whose practice includes litigation and international arbitration, said multinationals must be aware that contracts are not necessarily the final word in other countries. “People sign contracts with arbitration clauses and they assume they will be arbitrating,” he said. “And they wake up one day and find out they will be sued in another country, which is exactly what they thought they would be able to avoid with an arbitration clause.” New tactics Jose Astigarraga, managing partner of Miami’s Astigarraga Davis, said Latin American distributors are increasingly pursuing a range of tactics when disputes with multinationals arise, such as filing customs or regulatory complaints or even using the criminal court system. Multinationals need to do their due diligence and know with whom they are doing business, he said. “I think the multinational companies need to be better armed and more able to deal with these tactics,” Astigarraga said, adding he believes that the issue of anti-suit injunctions will reach the Supreme Court. A key element in these cases is whether American courts are willing to enforce injunctions to avoid parallel proceedings, as the Florida court did, said Greg Castanias, a trial and appellate litigator who is a partner in the Washington office of Jones Day. “What is important in these cases is that not only the parties agree on these clauses,” he said, “but that the courts in the United States are willing to enforce those clauses in a way that makes them useful.”

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