Colorado Court Holds That Forum Non Conveniens Dismissal Is Not Preclusive
July 27, 2022
When a court in the United States grants a motion to dismiss for forum non conveniens, finding that a plaintiff’s claims should be litigated abroad, may the plaintiff instead choose to refile its claims in another U.S. jurisdiction? The answer will often be yes because the forum non conveniens dismissal does not have issue preclusive effect.
That was the result the Colorado Court of Appeals reached in a recent case, Nation SLP v. Bruner, holding that a federal district court’s forum non conveniens dismissal did not preclude the plaintiff from refiling similar claims in Colorado state court. Yet, as explained below, the court’s reasoning was somewhat odd. A better way of reaching the same result would have been to recognize that the forum non conveniens issues were not the same in the two proceedings because Colorado’s state doctrine of forum non conveniens differs from the federal doctrine.
Around 2015, a group of investors formed Nation SLP to raise funds necessary to exploit oil and gas exploration permits in Australia. Some of the investors claimed that others cheated them out of their fair share of the profits. The aggrieved investors sued first in Australian court and then in federal district court in Colorado. The federal district court dismissed the claims on forum non conveniens grounds. It found that Australia was an available and adequate alternative forum and that the balance of private and public interests favored dismissal, particularly since Australian law would govern the claims.
The aggrieved investors then filed similar claims in Colorado state court against two of the same defendants in the federal action. The state trial court dismissed the claims, holding that the federal forum non conveniens decision was entitled to issue preclusive effect.
The Colorado Court of Appeals reversed. Under Colorado law, issue preclusion requires that the prior proceeding was decided by a final judgment “on the merits.” Citing the U.S. Supreme Court’s decision in Sinochem, the Colorado court held that “a dismissal on forum non conveniens grounds is not a final judgment on the merits.” Therefore, the federal court’s dismissal was not issue preclusive as a matter of Colorado law.
The Colorado Court of Appeals’ decision in Nation SLP was odd in a few respects. First, Colorado’s requirement that a judgment must be “on the merits” represents a very narrow doctrine of issue preclusion. Under federal common law, by contrast, only claim preclusion requires a judgment on the merits; issue preclusion does not. The Supreme Court has held, for example, that jurisdictional determinations may result in issue preclusion although they are not judgments on the merits.
Second, the Colorado court failed to ask whether federal or state principles of issue preclusion should be applied. Under Semtek, federal common law governs the preclusive effect of federal judgments in state courts. In federal question cases, federal principles of preclusion apply, whereas in diversity cases federal common law adopts state principles of preclusion. The federal court’s forum non conveniens dismissal at issue in Nation SLP involved both federal RICO claims and non-federal fiduciary duty and fraudulent concealment claims. Because only the fraudulent concealment claims were refiled in Colorado state court, one might argue that state principles of preclusion should govern here. But one finds not a word about this question in the Colorado Court of Appeals’ opinion.
A Better Way
In Nation SLP, there was a better path to the same result. Issue preclusion generally requires that the issue litigated in the two proceedings be identical. And as Maggie Gardner, Chris Whytock, and I point out in a forthcoming article, state law on forum non conveniens often differs from the federal doctrine. Indeed, this is true in fully one-third of the states.
Colorado is one of those states. In 1976, the Colorado Supreme Court adopted a common law doctrine of forum non conveniens. That doctrine is narrower than the federal doctrine and appears never to have resulted in dismissal of claims filed in Colorado state court. In 2004, however, the Colorado legislature enacted a broader forum non conveniens statute applicable only to out-of-state plaintiffs. It permits dismissal if one or more of the following factors is present: an alternative forum exists, the injury occurred outside Colorado, a substantial part of the witnesses and evidence is outside Colorado, and there is a significant possibility that Colorado law will not apply. If all these factors are present, dismissal is required.
It is not clear whether the plaintiff in the Colorado state court proceeding, Nation SLP, is a Colorado corporation or not. But in either event, forum non conveniens under Colorado law differs from the federal doctrine. If the plaintiff is a Colorado resident, then the statute does not apply and dismissal under the common law doctrine would be warranted only “in most unusual circumstances.” If, as seems more likely, the plaintiff is not a Colorado resident, then dismissal could be granted if Australia provides an alternative forum, or the injury occurred outside Colorado, or the witnesses and evidence are outside Colorado, or Australian law governs the claims.
Some have argued for greater preclusive effect of forum non conveniens dismissals. One might resist that argument by noting that forum non conveniens determinations are forum specific, because the balance of private- and public-interest factors may change depending on where the suit is brought. Even between state and federal court in the same state, factors such as the burden on the court system and the ability to implead other parties may differ.
Additionally, in many states, the rules for forum non conveniens are different from the federal doctrine and from the doctrines in other states. Suits may be permitted to go forward in Colorado, Delaware, or Texas state courts that would be dismissed from federal courts or in California or Florida state courts. These differences mean that a forum non conveniens dismissal in one jurisdiction should not necessarily preclude refiling in another jurisdiction.
Although the Colorado Court of Appeals in Nation SLP used some strange reasoning to get there, it reached the right result. And the case serves as a useful reminder that the dismissal of a transnational case on forum non conveniens grounds does not necessarily mean the end of litigation in the United States.