District Court Rejects Forum Non Conveniens Motion in Haiti Price-Fixing Case
October 12, 2023
The plaintiffs in Celestin v. Martelly brought a class action alleging that Haitian President Michel Joseph Martelly hatched a scheme to impose fees and fix prices on money transfers, food remittances, and international calls to and from Haiti and that Haitian and U.S. companies joined the scheme in violation of U.S. antitrust law, the federal Communications Act, and various state laws. As previously discussed at TLB, the Second Circuit correctly held that the act of state doctrine does not bar the federal antitrust claims because those claims could succeed without rendering invalid any official government act in Haiti.
On remand, the defendants moved to dismiss for forum non conveniens and failure to state claims upon which relief can be granted. In a thorough and well-reasoned decision, the District Court for the Eastern District of New York (EDNY) (Judge LaShann DeArcy Hall) held that the plaintiffs’ status as class representatives did not reduce the deference owed to their choice of forum for purposes of forum non conveniens. But she dismissed all the claims, save those under the Communications Act, for failure to state a claim. The decision addresses an important and unsettled question about the application of forum non conveniens to class. It also provides an example of how the act of state doctrine should be applied—and of how difficult it can be for plaintiffs to adequately allege antitrust conspiracies.
Forum Non Conveniens
The federal doctrine of forum non conveniens allows a district court to dismiss claims more appropriately heard in another country’s courts. To apply the doctrine, the court must first determine the degree of deference owed to the plaintiffs’ choice of forum. Second, the court must consider whether the alternative forum proposed by the defendants is adequate and available. Third, the court must balance public and private interest factors to decide if dismissal is warranted.
At the first step, defendants argued that plaintiffs’ decision to sue in the EDNY was entitled to less deference because they represent a class of plaintiffs spread throughout the United States. Defendants relied on the Supreme Court’s decision in Koster v. (American) Lumbermen’s Mutual Casualty Co. (1947), in which the Court observed that a plaintiff’s choice of forum in a derivative suit was entitled to weak deference because he was one of “hundreds of potential plaintiffs, all equally entitled voluntarily to invest themselves with the corporation’s cause of action and all of whom could with equal show of right go into their many home courts.” As Judge Hall noted, it remains an open question in the Second Circuit whether a plaintiff’s choice of forum is entitled to less deference in a class action.
Judge Hall held that plaintiffs’ status as class representatives in this case did not reduce the deference owed to their choice of forum. In Koster, she noted, the alternative forum was another U.S. state where there were potential plaintiffs equally able to vindicate the rights of the corporation. “In contrast, Plaintiffs here are American residents and citizens who have brought suit in their home country pursuant to federal and state law against Haitian defendants, and Plaintiffs are the real party in interest.” In fact, Judge Hall noted, the class was defined as persons who were charged additional fees in the United States (rather than in Haiti). “The Court discerns no reason to afford Plaintiffs’ chosen forum less deference simply because they purport to represent a class of similarly situated individuals across the country, particularly when the alternative forum is a foreign country, not another state.”
That reasoning seems clearly correct. Since Congress enacted 28 U.S.C. § 1404(a), allowing transfer between federal districts, the federal doctrine of forum non conveniens in cases not involving forum selection clauses has been limited almost completely to transnational cases in which the alternative forum is a court in another country. When the entire class consists of U.S. citizens and residents, the choice of a U.S. forum is entitled to great deference, and any argument that a different district would be preferable can be addressed on a transfer motion.
The court went on to conclude that Haitian courts are not an adequate forum because of the current level of violence in Haiti, which could put plaintiffs’ lives in danger.
For completeness, the court also addressed the balance of public and private interests. Defendants argued that Haiti has a stronger interest in addressing these claims than the United States, but Judge Hall disagreed. “Plaintiffs’ allegations,” she noted, “are that the presidents of Haiti conspired with American companies to fix money transfer and telecommunications prices in the United States, and that Defendants’ representations to American citizens about those fees were false.” The harm to people in Haiti “does not negate nor alter the allegations that the funds were taken out of American citizens’ pockets in the United States.” As for private interests, relevant evidence was located both in Haiti and in the United States, and some translation would be required in either court.
“Even assuming that Haiti is an adequate forum,” the court concluded, “Plaintiffs’ chosen forum is due substantial deference given the demonstrated bona fide connections to the United States, and the public and private interest factors do not weigh heavily in favor of dismissal.” Unfortunately for the plaintiffs, they survived the forum non conveniens motion only to have most of their claims dismissed because the pleadings fell short.
Failure to State a Claim
Plaintiffs brought a range of claims under federal and state law. But only their claims under the federal Communication Act survived in the end.
Plaintiffs’ federal Sherman Act claims rested on two circulars issued by the Central Bank of Haiti and two videos. But none of this evidence implicated the defendants in a price-fixing scheme. “The evidence establishes at most that on three separate occasions Martelly, then-president of Haiti, met with unspecified individuals to discuss the imposition of a tax or fee on phone calls and money transfers into Haiti,” Judge Hall summarized. “Plaintiffs provide no basis, other than their own speculation, to conclude that Defendants conspired to fix prices and that the taxes were a mechanism for doing so.”
Plaintiffs also brought claims for fraud, deceptive practices, and conversion under New York, Florida, and California law based on statements that the fees were lawful and would be used to fund education in Haiti. But plaintiffs failed to allege that the corporate defendants made any representations about the fees, that statements about the fees being lawful were false, or that plaintiffs relied on such representations. Judge Hall observed, “it is unclear how the education plan could be material in Plaintiffs’ decision to send money or make phone calls to Haiti.” Plaintiffs’ claims under sections 349 and 350 of New York’s General Business Law, which prohibit deceptive acts and false advertising, failed for similar reasons.
Plaintiffs alleged that two of the defendants violated New York Banking Law section 131 by causing customers to deposit money in accounts and collecting the fees. But plaintiffs’ allegations failed to establish that the defendants engaged in unauthorized banking or that plaintiffs were injured by any violation of New York’s banking law rather than by the imposition of the fees.
In the end, Judge Hall held that only plaintiffs’ claims under section 202 of the federal Communications Act could go forward. Section 202 prohibits common carriers from making “any unjust or unreasonable discrimination in charges.”
Act of State Doctrine Redux
Although the district court dismissed most of the plaintiffs’ claims under Rule 12(b)(6), the act of state doctrine peeks through in a few places. In footnote 18, the court noted that the act of state doctrine would preclude fraud claims based on the alleged illegality of the fees under Haitian law (although defendants waived the argument by first raising it in their reply brief). And in footnote 19, the court observed that the conversion claim against former President Martelly had to be dismissed on act of state grounds. Because the fees were imposed by the Haitian government, the plaintiffs had no right to the fees. “To the extent Martelly took money from the Haitian government,” Judge Hall noted, “it is the Haitian government, not Plaintiffs who would have a conversion claim.”
This ruling illustrates the limited but proper scope of the act of state doctrine. As the Second Circuit noted in its decision reversing and remanding the district court’s initial dismissal, the act of state doctrine does not preclude claims based on foreign government acts. But it does require that U.S. courts, in the course of deciding those claims, assume that foreign government acts are valid.
Haiti is among the poorest countries in the world. It is shocking that its elected officials would scheme to enrich themselves by imposing government taxes and fees on phone calls, transfers, and remittances. As the Second Circuit properly held, the act of state doctrine does not bar claims based on such a scheme. And as the district court properly held, such claims are appropriately brought in U.S. courts. But antitrust conspiracies are hard to plead. If some of the defendants did violate the Sherman Act, it is a shame that the plaintiffs did not have more factual support for those allegations.