Commercial Litigation and Arbitration

Bulgaria, as an EU Nation, Is an Adequate Alternative Forum for Forum Non Conveniens Purposes, Despite Corruption Concerns, Limited Remedies, and Filing Fee of 4% of Total Claimed Damages

From Stroitelstvo Bulgaria Ltd. v. Bulgarian-Am. Enter. Fund, 2009 U.S. App. LEXIS 27257 (7th Cir. Dec. 14, 2009):

A threshold requirement for any forum non conveniens dismissal is the existence of an alternative forum that is both "available" and "adequate." Kamel v. Hill-Rom Co., Inc., 108 F.3d 799, 802 (7th Cir. 1997). An alternative forum is "available" if all of the parties are amenable to process and within the forum's jurisdiction.... Stroitelstvo does not dispute that Bulgaria is an available forum. The Bank, which operates in Bulgaria, and BAEF, which maintains an office in Sofia, are both amenable to process and within the Bulgarian courts' jurisdiction. Moreover, BAEF has consented to the Bulgarian courts' jurisdiction as a condition of forum non conveniens dismissal.

The adequacy of a Bulgarian forum, on the other hand, is the central dispute in this appeal. An alternative forum is adequate if it provides the plaintiff with a fair hearing to obtain some remedy for the alleged wrong.... It is not necessary that the forum's legal remedies be as comprehensive or as favorable as the claims a plaintiff might bring in an American court.... Instead, the test is whether the forum provides some potential avenue for redress for the subject matter of the dispute. ***

At least some substantial expert testimony in this case indicated that Stroitelstvo could expect a fair hearing in the Bulgarian courts. As the experts recognized, Bulgaria gained admission to the European Union in 2007, and one requirement for EU membership is that the nation have a stable legal system that guarantees the rule of law. The defendants' expert, Chernev, also stated that Bulgaria has an independent judiciary that provides full and fair consideration of commercial disputes.

It is true that all of the experts lamented a public perception of corruption in the Bulgarian courts, and Skochev, Stroitelstvo's expert, even claimed that the Bulgarian legal system was incapable of providing a fair hearing. Still, the experts made no attempt to quantify this purported corruption or document particular plaintiffs or claims that were treated unfairly. Their generalized, anecdotal complaints of corruption are not enough for a federal court to declare that an EU nation's legal system is so corrupt that it can't serve as an adequate forum. See Tuazon v. R.J. Reynolds Tobacco Co., 433 F.3d 1163, 1179 (9th Cir. 2006) (finding the plaintiff's "anecdotal evidence of corruption and delay" in the Philippine courts insufficient to show inadequacy); In re Arbitration between Monegasque de Reassurances S.A.M. v. Nak Naftogaz of Ukr., 311 F.3d 488, 499 (2d Cir. 2002) (refusing "to pass value judgments on the adequacy of justice and the integrity of Ukraine's judicial system on the basis of no more than . . . bare denunciations and sweeping generalizations"); Leon v. Millon Air, Inc., 251 F.3d 1305, 1312 (11th Cir. 2001) (requiring the plaintiff to substantiate allegations of serious corruption or delay with "significant evidence documenting the partiality or delay . . . typically associated with the adjudication of similar claims").

The expert testimony also showed that Bulgarian law provides some remedy for the subject matter of this dispute, the Bank's alleged breach of the loan contract and predatory lending practices. Chernev cited several provisions of the Bulgarian Obligations and Contracts Act that enforce contractual obligations and provide for damages against a commercial party who fails to act in good faith. Although Stroitelstvo's experts disagreed with Chernev on the full scope of remedies available under Bulgarian law, it was undisputed that the Act would support a breach of contract action and damages remedy against the Bank for the conduct alleged in Stroitelstvo's complaint.

To be sure, Bulgarian law might not support the full array of legal claims spelled out in Stroitelstvo's federal-court complaint. In particular, the experts agreed that Bulgaria has no equivalent to Stroitelstvo's RICO claim. That is neither surprising, since RICO is a uniquely American effort to target organized crime, see Kempe v. Ocean Drilling & Exploration Co., 876 F.2d 1138, 1143-44 (5th Cir. 1989), nor problematic, since federal courts have routinely held that the loss of a RICO claim does not by itself preclude a forum non conveniens dismissal, Yavuz v. 61 MM, Ltd., 576 F.3d 1166, 1177 n.6 (10th Cir. 2009) (citing cases).

The experts battled over whether Bulgarian law would recognize Stroitelstvo's other tort claims, or otherwise provide adequate substitutes for those claims and the RICO claim. ***

We think that this dispute over the range of legal claims that Stroitelstvo can pursue in a Bulgarian court merely demonstrates "the possibility of an unfavorable change in the law," which ordinarily does not carry substantial weight in the forum non conveniens analysis. Piper Aircraft v. Reyno, 454 U.S. 235, 249 (1981). Although Stroitelstvo's experts characterized the relief available under Bulgarian law as partial and incomplete, their testimony does not show that this relief is "so clearly inadequate or unsatisfactory that it is no remedy at all." ... As for the possible loss of Stroitelstvo's tort claims against these corporate defendants, it is undisputed that Stroitelstvo would retain a claim for contract damages under the Obligations and Contracts Act. In that sense, this case is like Kamel, in which we concluded that the availability of a breach of contract action made the forum adequate, despite the plaintiff's argument that the forum would not recognize his tort claims. 108 F.3d at 803. Of course, each forum non conveniens case is fact-specific, and we do not say that an alternative forum is necessarily adequate to resolve a tort plaintiff's claims simply because the defendant can point to some conceivable contract remedy. Here, though, the contractual remedies available under Bulgarian law go to the heart of this dispute, a loan contract between Stroitelstvo and the Bank.

In an attempt to prove that its experts are correct that the Bulgarian courts cannot adjudicate its claims, Stroitelstvo has already filed a complaint identical to the one that it filed in federal court in a Bulgarian district court. Sure enough, the Bulgarian court dismissed Stroitelstvo's complaint for presenting a combination of contractual and tort claims in a manner inconsistent with Bulgarian law. Still, this dismissal hardly demonstrates that the Bulgarian court is inadequate to resolve Stroitelstvo's dispute, for the court simply ordered Stroitelstvo to re-prepare its complaint in accordance with Bulgarian, not American, law. It would be remarkable if any foreign court were to accept Stroitelstvo's American-law complaint without change, and Stroitelstvo's argument that the Bulgarian court's refusal to do so makes it inadequate is unpersuasive.

Slightly more persuasive is Stroitelstvo's argument that Bulgarian law is incapable of providing relief against one of two parties in this case, BAEF. ***

Initially, we reiterate that it is not beyond dispute that Stroitelstvo would be unable to sue BAEF in tort under Bulgarian law. *** More importantly, we think that Stroitelstvo's argument about losing a defendant is more or less the same as its argument about losing its preferred American-law tort claims. It is an overstatement to say that a forum non conveniens dismissal will cause Stroitelstvo to "lose" BAEF as a defendant; BAEF is a defendant in this case that has consented to the jurisdiction of the Bulgarian courts. In our view, Stroitelstvo's real concern is that any Bulgarian-law substitutes that it might come up with for its complex American-law claims against BAEF will ultimately fail. It is possible that Stroitelstvo's prediction will prove true and BAEF will win a dismissal, causing Stroitelstvo to effectively "lose" BAEF from the case. It is also possible that the Bulgarian courts will interpret the Obligations and Contracts Act to extend tort liability to BAEF under these circumstances, or that Stroitelstvo will identify a natural person whose tortious acts may be imputed to BAEF, or that Stroitelstvo will assert a contractual claim cognizable against a corporate defendant like BAEF. We need not be certain that Stroitelstvo would succeed in its claims against BAEF in order to find Bulgaria an adequate forum. See In re Factor VIII or IX Concentrate Blood Prods. Litig., 484 F.3d 951, 957-58 (7th Cir. 2007) (noting that the U.K. approach to the plaintiff's claim was uncertain but finding the forum adequate). It is enough to conclude that, whatever the chances of any particular claim against either defendant in this case, Bulgarian law gives Stroitelstvo some potential avenue for redress.

In addition to an arguably less favorable substantive law, the Bulgarian legal system has certain procedural requirements that Stroitelstvo would prefer to avoid. In order to file a lawsuit in Bulgaria, a plaintiff must pay a filing fee equal to 4% of the damages claimed, a fee that is recoverable if the plaintiff prevails. For the (strikingly large) $ 30 million damages demanded in Stroitelstvo's complaint, the fee would be $ 1.2 million, much more than what Stroitelstvo's director said the company could afford. Although the financial hardship of requiring a plaintiff to sue outside of the chosen forum is relevant to the forum non conveniens analysis, see Macedo v. Boeing Co., 693 F.2d 683, 690 (7th Cir. 1982), we conclude that Bulgaria's filing fee does not preclude dismissal. Federal courts have declined to find foreign forums inadequate based on filing fees similar to the 4% fee required here. See Altmann v. Republic of Austria, 317 F.3d 954, 972-73 (9th Cir. 2002) (concluding that Austria's 1.2% court fee was not oppressive in the context of the plaintiff's resources); Satz v. McDonnell Douglas Corp., 244 F.3d 1279, 1283 (11th Cir. 2001) (per curiam) ("The plaintiffs' concerns about Argentine filing fees . . . do not render Argentina an inadequate forum."); Mercier v. Sheraton Int'l, Inc., 981 F.2d 1345, 1353 & n.7 (1st Cir. 1992) (characterizing the Turkish courts' cost bond of up to 15% of the recovery sought as non-excessive under the circumstances). More importantly, the district court in this case did not simply ignore the impact of the filing fee on Stroitelstvo's ability to sue in Bulgaria. Cf. Macedo, \693 F.2d at 690 (reversing a forum non conveniens dismissal based in part on the district court's failure to consider the financial hardship to the plaintiffs of litigating in Portugal); Lehman v. Humphrey Cayman, Ltd., 713 F.2d 339, 345-47 (8th Cir. 1983) (finding that the district court failed to consider the plaintiff's practical ability to litigate claims in the Cayman Islands, where lawyers did not take cases on a contingent-fee basis and foreign litigants had to pay a cost bond). The court noted that the large $ 1.2 million filing fee was driven by Stroitelstvo's $ 30 million damages claim, which in turn resulted from Stroitelstvo's demand for treble damages under RICO. See 18 U.S.C. § 1964(c). Since Bulgaria has no equivalent to RICO, Stroitelstvo's damages claim, and hence the filing fee, would probably be lower upon converting Stroitelstvo's complaint to claims cognizable under Bulgarian law. The district court did not abuse its discretion in concluding that Bulgaria's filing fee, typical for a civil law country, Altmann, 317 F.3d at 972, and driven in size only by Stroitelstvo's complaint, did not make Bulgaria an inadequate forum.

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