Forum Non Conveniens: Where Derivative Action Involves Few Shareholders of Non-U.S. Corporation, Less Deference Due Plaintiffs’ Choice of Forum — Need to Apply New Corporation Law of Foreign Country Augurs in Favor of Dismissal

From In re BP Shareholder Deriv. Litig., 2011 U.S. Dist. LEXIS 104817 (S.D. Tex. Sept. 15, 2011):

Defendants argue that the need to apply this recently enacted U.K. statute, which substantively alters directors' duties, weighs strongly in favor of proceeding with the case in England. Indeed, they argue, litigating this case before the English High Court would ensure a "forum that is at home with the law that must govern the action" and avoid "unnecessary problems . . . in the application of foreign law." (Mot. at 21.) Because the Companies Act went into effect less than four years ago, they maintain, the English High Court has had only limited opportunities to apply its provisions, many of which diverge from the preexisting common law rules. Defendants' expert asserts, "[t]here are relatively few decided cases since the 2006 Act came into force — derivative claims remain fairly rare in England and Wales. . . . To date, the decided cases have related to shareholder disputes in much smaller companies than BP Plc." (Moore Decl. ¶ 38.) Given the lack of precedent to guide this Court and the evolving nature of the jurisprudence under the Companies Act, Defendants urge that the English High Court should resolve issues of first impression arising out of its own statute rather than having this Court "untangle problems in conflict of laws, and in law foreign to itself." (Mot. at 21) (quoting Piper, 454 U.S. at 251 ("The doctrine of forum non conveniens . . . is designed in part to help courts avoid conducting complex exercises in comparative law . . . .") (quotations omitted)); see also Denmark v. Tzimas, 871 F. Supp. 261, 271 (E.D. La. 1994) ("Although this court is capable of applying English law, the courts of England are certainly better suited for such a task.").

Defendants further observe that the parties have submitted vastly divergent expert declarations on English law in connection with the instant motion to dismiss. Citing a recent case in the Southern District of Florida, Defendants claim that the divergent declarations underscore the importance of having an English court hear this dispute. See In re Banco Santander Sec.-Optimal Litig., 732 F. Supp. 2d 1305, 1339 (S.D. Fla. 2010) (dismissing case on forum non conveniens grounds where Irish law would apply to the merits and "the substantial disagreements between the parties' respective experts on several basic legal matters . . . [had] given the Court a preview of even thornier problems to come").

Plaintiffs counter that "'the need to apply foreign law is not alone sufficient to dismiss under the doctrine of forum non conveniens.'" Karim v. Finch Shipping Co., 94 F. Supp. 2d 727, 737 (E.D. La. 2000) (quoting R. Maganlal & Co. v. M.G. Chemical Co., Inc., 942 F.2d 164, 169); see also Schexnider v. McDermott Int'l, Inc., 817 F.2d 1159, 1164 (5th Cir. 1987) (noting that courts "must guard against an excessive reluctance to undertake the task of deciding foreign law, a chore federal courts must often perform") (quotations omitted).

Although the need to apply foreign law is alone insufficient to dismiss under the doctrine of forum non conveniens, it "certainly is a factor weighing in favor of trying the case in" England. Schexnider, 817 F.2d at 1163. Moreover, this case is exceptional in that it would require the Court to interpret a recently enacted statutory corporate governance scheme that has replaced the common law derivative action. The Court has already received a preview of the intricate questions of law that proceeding with this case would require it to resolve, as well as the significant disagreements between the parties as to the appropriate standards to apply. Indeed, seventy pages of expert declarations alone were filed on the single issue of whether Section 261 of the Companies Act requires Plaintiffs to first seek permission from the English High Court to continue their lawsuit.

Further complicating the Court's task is the fact that it would enjoy little guidance from the English courts, as few relevant legal issues have been addressed. Given the continued evolution of Companies Act jurisprudence, the Court is deeply concerned that, if it were to proceed to the merits of this case, intervening pronouncements from the English courts could significantly interfere with its progress. Accordingly, the third and fourth public interest favors weigh heavily in favor of England as the more convenient forum. ***

The Court concludes that England, as the focal point of this litigation, is the far more appropriate forum. Because this derivative lawsuit involves the internal governance of an English corporation, the convenience of the parties and the interests of justice favor England as a more convenient forum. See Turan v. Universal Plan Investments Ltd., 248 F.3d 1139, 2001 WL 85902, at *5 (5th Cir. Jan. 24, 2001) (unpublished) ("Hong Kong is the focal point of this litigation, because it involves the internal governance of a Hong Kong corporation." (citing Koster, 330 U.S. at 527 (finding that although no rule requires dismissal upon mere showing that trial will involve issues relating to internal affairs of foreign corporation, it is factor which may "show convenience of parties or witnesses, the appropriateness of trial in a forum familiar with the law of the corporation's domicile, and the enforceability of the remedy if one be granted"))). This case is unique because it is a derivative lawsuit involving the internal affairs of a foreign corporation. Indeed, because Plaintiffs are just a handful of the thousands of potential shareholders that could sue the individual defendants on behalf of BP, their choice of forum is accorded less deference than the typical home forum plaintiff in a traditional two party lawsuit. Moreover, because this lawsuit calls for an inquiry into the knowledge and actions of BP's Board of Directors, the lion's share of the relevant documents and the majority of the individual defendants are located in England. Given the decreased deference accorded to Plaintiffs' choice of an American forum, the private interest factors weigh slightly in favor of dismissal.

It is the public interest factors, however, that most strongly favor England as the appropriate forum in which to proceed with this case. These factors persuade the Court that this action should be dismissed. The primary concern of this derivative litigation is the internal affairs of an English corporation, and the suit seeks to recover damages for the benefit of BP only. Accordingly, England has a greater interest in the resolution of this dispute. Moreover, English law governs this dispute and will determine whether the individual defendants breached their fiduciary duties and harmed BP in the process. Thus, English law would predominate and, if the case were to continue here, the Court would be faced with the formidable exercise of interpreting and applying a still nascent and evolving body of foreign law. The Court would be saddled with not only the ordinary task of adjudication, but also the additional administrative tasks characteristic of derivative actions articulated in Koster. Dismissing this case would relieve this Court of the substantial burdens of such undertakings. Finally, the citizens of Louisiana should not be burdened, as factfinders, with the exercise of applying complex English law to determine whether the individual defendants harmed an English company through unlawful acts and inadequate oversight. As these public interest considerations counsel strongly in favor of dismissal, Defendants' Motion is hereby GRANTED.

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