Wednesday, November 01, 2006

Second Circuit Holds International Comity Abstention Not Warranted When Parallel Proceeding Exists in Canada

BNA’s United States Law Week reported in Vol. 75, No. 15 (Oct. 24, 2006) on the case Royal and Sun Alliance Insurance Co. of Canada v. Century International Arms Inc., --- F.3d ----, 2006 WL 2873046 (2d Cir. Oct. 10, 2006). Here is an excerpt from the case:

We have recognized one discrete category of foreign litigation that generally requires the dismissal of parallel district court actions--foreign bankruptcy proceedings. A foreign nation's interest in the "equitable and orderly distribution of a debtor's property" is an interest deserving of particular respect and deference, and accordingly we have followed the general practice of American courts and regularly deferred to such actions. See Victrix S.S. Co., S.A. v. Salen Dry Cargo A.B., 825 F.2d 709, 713-14, 715 (2d Cir.1987); accord JP Morgan Chase Bank, 412 F.3d at 424; Finanz AG Zurich v. Banco Economico S.A., 192 F.3d 240, 246 (2d Cir.1999); Allstate Life Ins. Co. v. Linter Group Ltd., 994 F.2d 996, 999 (2d Cir.1993).

Outside the bankruptcy context, we have yet to articulate a list of factors a district court should consider when exercising its discretion to abstain in deference to pending litigation in a foreign court. However, whatever factors weigh in favor of abstention, "[o]nly the clearest of justifications will warrant dismissal." Colorado River, 424 U.S. at 819, 96 S.Ct. 1236.

Appellees contend that the above standards, articulated by the Supreme Court in Colorado River and Moses H. Cone, do not apply to the present matter because those cases involved abstention in favor of parallel state proceedings while the parallel action here at issue is pending in a foreign jurisdiction.

. . .

In the context of parallel proceedings in a foreign court, a district court should be guided by the principles upon which international comity is based: the proper respect for litigation in and the courts of a sovereign nation, fairness to litigants, and judicial efficiency. See Turner Entm't Co. v. Degeto Film GmbH, 25 F.3d 1512, 1518 (11th Cir.1994); see also United Feature Syndicate, Inc. v. Miller Features Syndicate, Inc., 216 F.Supp.2d 198, 212 (S.D.N.Y.2002). Proper consideration of these principles will no doubt require an evaluation of various factors, such as the similarity of the parties, the similarity of the issues, the order in which the actions were filed, the adequacy of the alternate forum, the potential prejudice to either party, the convenience of the parties, the connection between the litigation and the United States, and the connection between the litigation and the foreign jurisdiction. See, e.g., Finova Capital Corp., 180 F.3d at 898- 99; see also Bigio, 239 F.3d at 454. This list is not exhaustive, and a district court should examine the "totality of the circumstances," Finova Capital Corp., 180 F.3d at 900, to determine whether the specific facts before it are sufficiently exceptional to justify abstention.

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