Originally from:
The Practice of International Litigation - 2nd Edition - Looseleaf
The Practice of International Litigation - 2nd Edition - Electronic
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Antisuit Injunctions and the Race to Judgment
Lawrence W. Newman and Michael Burrows
An American corporation, “USCorp,” is contemplating litigation in the
federal courts of New York against “WorldCorp,” a foreign entity. USCorp
suspects that, if litigation were to prove necessary, WorldCorp would rather
litigate the matter in the courts of its home country. Although USCorp is
certain that the contacts with New York are sufficient for its case to survive
a motion to dismiss on the basis of forum non conveniens, it is concerned that
WorldCorp might commence a parallel foreign proceeding in its home
country —one in which it seeks relief in its favor with respect to the same
underlying facts. Can USCorp ensure that the foreign proceeding not go
forward?
In light of the Sixth Circuit case Gau Shan Co. v. Bankers Trust Co., which
reinforced the current trend of placing stricter controls on the granting of
antisuit injunctions, the answer is probably not. USCorp must simply file
its New York case as quickly as possible, in an effort to obtain a judgment
before the foreign tribunal hands down its decision, and then apply the
doctrine of res judicata. In other words, it is a “race to judgment” between
the two courts.
In transnational litigation, one of the most controversial tactics is the use
of the antisuit injunction. In seeking an antisuit injunction to a lawsuit, a
party, usually the plaintiff, attempts to freeze, or prevent the
commencement of, foreign proceedings by another party to the same
lawsuit. The federal circuits are split on the stringency of the test for
granting antisuit injunctions. The older cases, in the Fifth and Ninth
Circuits, have established a more lenient test, while the more recent cases in
the D.C., Second and Sixth Circuits have erected more demanding
standards.
Lenient Test
One of the earliest cases to address the issue of antisuit injunctions in an
international context was In re Unterweser Reederei, GmbH, in the Fifth
Circuit. There, Zapata, a Delaware corporation, commenced an action
against Unterweser, a German corporation, in the Middle District of
Florida. Unterweser filed various motions in the Florida proceeding, but
then commenced an action in the High Court of Justice in London. Zapata
subsequently moved for an injunction in the Florida case to restrain
Unterweser from proceeding with its London case. In granting Zapata’s
motion, the Fifth Circuit noted that injunctions should be granted where
the foreign litigation would: “(1) frustrate a policy of the forum issuing the
injunction; (2) be vexatious or oppressive; (3) threaten the issuing court’s in
rem or quasi in rem jurisdiction; or (4) where the proceedings [abroad]
prejudice other equitable considerations.”
The court then went on to state that the injunction was proper because
the district court was not in error in ruling that “allowing simultaneous
prosecution of the same action in a foreign forum thousands of miles away
would result in ‘inequitable hardship’ and ‘tend to frustrate and delay the
speedy and efficient determination of the cause.’”
Lawrence W. Newman has been a partner in the New York office of Baker & McKenzie since 1971, when, together with the late Professor Henry deVries, he founded the litigation department in that office. He is the author/editor of 4 works on international litigation/arbitration.
Michael Burrows, Formerly, Of Counsel, Baker & McKenzie, New York.
