Ch. 5 U.S. Court Abstention in Deference to Non-U.S. Proceedings

1. The international abstention doctrine originated from the federal abstention doctrine, detailed by the U.S. Supreme Court in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976). Whereas the federal abstention doctrine permits courts to stay suits pending parallel proceedings, the international abstention doctrine permits domestic courts to abstain from adjudicating proceedings over which they have jurisdiction in deference to non-U.S. proceedings. See Turner Entm’t Co. v. Degeto Film, 25 F.3d 1512, 1518 (11th Cir. 1994); Caspian Invs., Ltd. v. Vicom Holdings, Ltd., 770 F. Supp. 880, 885 (S.D.N.Y. 1991); Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976).
2. It is often said that, in cases where on U.S. forum is asked to stay its hand in favor of another U.S. forum, “[a]bstention from the exercise of federal jurisdiction is the exception and not the rule.” Colorado River, 424 U.S. at 813. Federal courts have a “virtually unflagging” obligation to adjudicate cases within their jurisdiction, and may decline jurisdiction only in exceptional circumstances. Id. at 817.
3. In Colorado River, the U.S. Supreme Court considered whether dismissal under the federal abstention doctrine was appropriate when the federal government sought a declaration of its water rights in a Colorado district court despite concurrent Colorado State proceedings. The U.S. Supreme Court explained that federal court abstention is appropriate in three circumstances: In cases “presenting a federal constitutional issue which might be mooted or presented in a difference posture by a state court determination of pertinent state law,” Id. at 814, quoting County of Allegheny v. Frank Mashuda Co., 360 U.S. 185, 189 (1959); “where there have been presented difficult questions of state law bearing on policy problems of substantial public import whose importance transcends the result in the case then at bar,” Colorado River, 424 U.S. at 814 quoting Louisiana Power & Light Co. v. City of Thibodaux, 360 U.S. 25, 79 (1959); and where “absent bad faith, harassment, or a patently invalid state statute, federal jurisdiction has been invoked for the purpose of restraining state criminal proceedings.” Colorado River, 424 U.S. 816 quoting Younger v. Harris, 401 U.S. 37, 91.

1. However, lower federal courts have addressed this issue extensively. They vary in their international abstention analyses. See Turner Entm’t, 25 F.3d 1512, 1518.
2. Some courts apply the Colorado River factors to international proceedings; others apply a similar set of principles while emphasizing specific concerns of international comity; and still others analyze the general goals of parallel litigation. Id. Each approach is discussed in turn below. How much of a difference the different standards make to the outcome of specific factual circumstances is debatable.

1. Various federal courts have applied the considerations of Colorado River in cases regarding international abstention. Finova Capital Corp v. Ryan Helicoters, U.S.A. Inc., 180 F.3d 896 (7th Cir. 1999); Turner Entm’t Co. v. Degeto Film Gmbh, 25 F.3d 1512, 1518 (11th Cir. 1994).
   1. Federal courts should generally consider “[w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation,” when determining whether to abstain from adjudication. Colorado River, 424 U.S. at 817, quoting Kerotest Mfg. Co. v. C-O-Two Fire Equip. Co. 342 U.S. 180, 183 (1952).
   2. More specifically, federal courts typically analyze the following factors when deciding whether to abstain from adjudicating an international proceeding:
      1. whether either court has assumed jurisdiction over a res;
      2. the relative convenience of the forums;
      3. the desirability of avoiding piecemeal litigation; and
      4. the order in which the forums obtained jurisdiction; whether state or federal law controls. See Colorado River, 424 U.S. 800, 817-818 Nakash v. Marciano, 882 F.2d 1411, 1415 (1989).
   3. Subsequent to Colorado River, the U.S. Supreme Court added two factors for federal court consideration, such that federal courts should now analyze a total of six factors when determining whether to abstain from adjudicating international proceedings. Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 23-27 (1983). Those two additional factors are:
      1. whether state or federal law controls;
      2. whether the state proceeding is adequate to protect the parties’ rights. Moses H. Cone Mem’l Hosp. v. Mercury Const. Corp., 460 U.S. 1, 23-27 (1983); Nakash v. Marciano, 882 F.2d 1411, 1415 (1989); Mujica v. Occidental Petroleum Corp., 381 F. Supp. 2d 1134, 1158 (C.D. Cal. 2005).

1. Courts applying the specific concerns approach generally consider five factors in determining whether to defer to non-U.S. proceedings. Dragon Capital, 949 F. Supp. at 1127; Caspian Invs., Ltd. v. Vicom Holdings, Ltd., 770 F. Supp. 880, 884 (S.D.N.Y. 1991); Goldhammer v. Dunkin’ Donuts, 59 F. Supp. 2d 248, 252 (D. Mass. 1999). Those five factors are: the similarity of the parties and issues involved in the proceedings, the temporal sequence of filing, fairness and prejudice considerations, non-U.S. forum relief available, and judicial efficiency. Dragon Capital, 949 F. Supp. at 1127.
2. Similarity of Involved Parties: Although the parties and issues of non-U.S. litigation need not be identical to those in domestic proceedings, they must, of course, be related. Dragon Capital, 949 F. Supp. at 1127. Therefore, where one has filed suit in a non-U.S. court, the addition of defendants or claims in a subsequent domestic proceeding does not preclude the domestic court from staying or dismissing the action in deference to the non-U.S. court. Id.
3. Temporal Sequence of Filing: When parallel non-U.S. and domestic proceedings are pending, domestic courts generally defer to the first suit filed. Id. at 1128 citing Ronar, Inc. v. Wallace, 649 F. Supp. 310, 318 (S.D.N.Y. 1986). Deference to non-U.S. proceedings is especially appropriate when those proceedings have proceeded past their first stages, and the party seeking resolution in a domestic court initiated the non-U.S. suit. Dragon Capital, 949 F. Supp. at 1127.
4. Fairness and Prejudice Considerations: Courts will not generally defer to a non-U.S. proceeding if the involved parties will be prejudiced by the non-U.S. litigation. See Dragon Capital Partners v. Merrill Lynch Capital Servs. Inc., 949 F. Supp. 1123 (S.D.N.Y. 1997). However when a plaintiff initiates non-U.S. litigation, she waives non-U.S. selection in a domestic court. Dragon Capital Partners v. Merrill Lynch Capital Servs. Inc., 949 F. Supp. 1123, 1128 (S.D.N.Y. 1997); Caspian Invs., Ltd. v. Vicom Holdings, Ltd., 770 F. Supp. 880, 885 n.5 (S.D.N.Y. 1991).
5. Non-U.S. Forum Relief Available:
   1. A non-U.S. court must be able to provide adequate relief to the plaintiff for a domestic court to defer. Dragon Capital, 949 F. Supp. at 1129. It is unnecessary for a non-U.S. court to have the same remedies at its disposal as a domestic court. Id.
   2. Domestic courts may defer to non-U.S. courts even if those non-U.S. courts will apply U.S. domestic law to the proceedings. Id. at 1130.
   3. The Eleventh Circuit opted to stay parallel domestic proceedings rather than dismiss them where a non-U.S. lower court had adjudicated a suit, however, the non-U.S. appellate court had not yet reached a decision. Turner Entm’t, 25 F.3d at 1518.  Therefore, relief was still available in the foreign court. 
6. Judicial Efficiency: U.S. domestic courts generally consider whether the non-U.S. courts are already familiar with the facts of the case, and whether the litigation has proceeded adequately in those courts. See Dragon Capital, 949 F. Supp. at 1127 (citing Caspian Invs., Ltd., 770 F. Supp. at 884).

Goals of International Litigation Approach

1. Courts have articulated three goals in the area of international jurisdiction: international comity, fairness to litigants and the efficient use of judicial resources. Turner Entm’t Co., 25 F.3d at 1518; Goldhammer, 59 F. Supp. 2d at 253. Some courts have considered each of these goals in turn in determining whether to defer to non-U.S. proceedings. Turner Entm’t Co., 25 F.3d at 1518; Goldhammer, 59 F. Supp. 2d at 252.
   1. International comity: Historically, courts have evaluated three factors when concerned about international comity: whether the non-U.S. court was fraudulent, whether the non-U.S. court was competent with judicial proceedings consistent with civilized jurisprudence, and whether the non-U.S. court was prejudicial.
      1. Some cases have also considered the strength of the courts’ interest. Turner Entm’t Co., 25 F.3d 1512, 1521 (11th Cir. 1994).
      2. Generally, failure to defer to non-U.S. judgments on the merits upsets international comity. Id. at 1521
      3. Where a non-U.S. court rendered a judgment on the merits, but had not yet adjudicated the appeal, the Eleventh Circuit opted to stay parallel domestic proceedings instead of dismissing them. Id. at 1522
   2. Fairness to litigants: Courts have considered three factors in determining whether deference to non-U.S. proceedings is fair: the order in which the suits were filed, the convenience of each forum, and the potential prejudice to the parties that would result from domestic deferral to the non-U.S. proceedings. Id. at 1521.
   3. Efficient use of judicial resources: When analyzing whether failure to defer to non-U.S. litigation would impede already scant judicial resources, courts have considered four factors: the inconvenience of the federal forum, the desirability of avoiding piecemeal litigation, whether the actions have similar parties and issues, and whether the alternative forum is likely to render a prompt disposition. Id. at 1522