De Borja v. Razon

• Decision Date: 16 August 2019
• Docket Number: Case No. 3:18-cv-01131-YY
• Parties: PATRICK R. DE BORJA, individually and MAKILING FARMS, INC., a Philippine corporation, Plaintiffs, v. ENRIQUE K. RAZON, JR., individually; INTERNATIONAL CONTAINER TERMINAL SERVICES, INC., a Philippine corporation; ICTSI OREGON INC., an Oregon corporation; and JOHN AND/OR JANE DOES 1-20, Defendants.
• Court: U.S. District Court — District of Oregon

PATRICK R. DE BORJA, individually and MAKILING FARMS, INC.,a Philippine corporation, Plaintiffs, v. ENRIQUE K. RAZON, JR., individually;INTERNATIONAL CONTAINER TERMINAL SERVICES, INC.,a Philippine corporation; ICTSI OREGON INC.,an Oregon corporation; and JOHN AND/OR JANE DOES 1-20, Defendants.

Case No. 3:18-cv-01131-YY

UNITED STATES DISTRICT COURT DISTRICT OF OREGON PORTLAND DIVISION

August 16, 2019

FINDINGS AND RECOMMENDATIONS

YOU, Magistrate Judge:

Before the court are six motions:

1) Defendants Enrique K. Razon, Jr. ("Razon Jr.") and International Container Terminal Services, Inc.'s ("ICTSI") (collectively "foreign defendants") motion to dismiss for lack of jurisdiction (ECF #27);

2) Defendant ICTSI Oregon Inc.'s ("ICTSI Oregon") motion to dismiss for failure to state a claim (ECF #31); 3) Plaintiffs Patrick R. de Borja ("de Borja") and Makiling Farms, Inc.'s ("MFI") motion for jurisdiction-related discovery (ECF #35); and

4) Three motions to strike the declarations in support of foreign defendants' motion to dismiss (ECF ##47-49).

As explained below, foreign defendants' motion to dismiss for lack of jurisdiction (ECF #27) should be granted because this case merits "immediate forum non conveniens dismissal." Sinochem Int'l Co. Ltd. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 435 (2007). The district court has discretion "to respond at once to a defendant's forum non conveniens plea, and need not take up any other threshold objection," including matters of subject matter jurisdiction or personal jurisdiction. Id. at 425. Forum non conveniens is a threshold, non-merits issue that may be prioritized "when considerations of convenience, fairness, and judicial economy so warrant." Id. at 432.

Here, in their various motions, plaintiffs have served up a Gordian Knot of jurisdictional, discovery, and evidentiary issues. Because this action should be brought in the Republic of the Philippines ("the Philippines") regardless of how that knot is untied, it serves the parties and the court to sidestep these "arduous inquir[ies]" and to do so without further delay. Id. at 436; Carijano v. Occidental Petroleum Corp., 643 F.3d 1216, 1227 (9th Cir. 2011) (observing that the Sinochem court "promoted judicial economy by allowing the district court to dismiss the case without first having to address complicated jurisdictional issues").¹

Additionally, plaintiffs' motion to strike the declaration of defendants' legal expert (ECF #49) should be denied because the court may consider expert testimony regarding foreign lawunder Federal Rule of Civil Procedure 44.1. All of the remaining motions (ECF ##31, 35, 47-48) should be denied as moot.²

FINDINGS

I. Alleged Facts

Plaintiffs' 128-page complaint catalogs the tenuous relationship between the de Borja and Razon families dating back to when Razon Jr.'s grandfather began working at a port in Manila in 1916. Compl. ¶¶ 62, 72, ECF #1. Razon Jr.'s father, Enrique Razon, Sr. ("Razon Sr."), created E. Razon, Inc. ("ERI") in 1962 to provide port operation services in Manila's South Harbor. Id. ¶¶ 62-67. Razon Sr. passed away in 1995. Id. ¶ 55.

The de Borja family formed MFI in 1975 to "hold their common real estate interests primarily consisting of land in Calamba City, Laguna, Philippines." Id. MFI is incorporated under Philippine law and has its principal place of business in Manila, Philippines. Id. ¶ 6.

MFI acquired 5% of ERI in 1976. Id. ¶ 68. In 1978, Razon Sr. became involved with the Marcos regime³ and demanded MFI's equity interest in ERI, but MFI refused. The families had a falling out, and MFI has not been informed of ERI's governance since that time. Id. ¶¶ 72, 89.

In 1987, Razon Sr. amalgamated ERI with two other entities, without the notice or consent of ERI's minority shareholders, to bid on a renewable 25-year contract to operate a container terminal in Manila's North Harbor. Id. ¶¶ 83-87. After securing the contract, the threeentities formed ICTSI. Id. ERI ceased to operate independently of ICTSI and effectively became a holding company. Id. ¶ 88.

Following the ouster of the Marcos regime in 1986, the first official act of the Philippine's new government was to create the Presidential Commission on Good Government ("PCGG"), which was tasked with recovering ill-gotten wealth from Marcos and his collaborators. Id. ¶¶ 74-76. In the late 1980s, during and after ICTSI's founding, the PCGG sued Razon Sr. for his involvement in several corrupt enterprises to recover ill-gotten wealth. Id. ¶¶ 77-82. These suits resulted in an unofficial settlement agreement between a member of the PCGG on behalf of the Philippines and Razon Sr. and his family, referred to hereafter as the "1990 Compromise." Id. ¶ 99. The 1990 Compromise was not properly approved by the PCGG or the Sandiganbayan, a Philippine court with special jurisdiction over corruption cases. Id. ¶¶ 101-102, n.73.

Plaintiffs allege that Razon Sr. and Razon Jr. fraudulently made four undisclosed, self-dealing transactions to divest ERI's minority shareholders, including MFI, of their stake in ICTSI. Id. ¶¶ 90-94. These fraudulent transactions were structured to appear as if they were made for valuable consideration, in part by satisfying penalties owed under the 1990 Compromise. Id. ¶ 95. But ERI was not a party to the 1990 Compromise, and plaintiffs claim that Razon Sr. fraudulently satisfied his personal liability under the 1990 Compromise with ERI shares. Id. ¶¶ 98-107.

Plaintiffs learned of the fraudulent amalgamation creating ICTSI in 2004. Id. ¶¶ 123-33. On October 7, 2004, MFI sent a demand letter to Razon Jr. asserting it owned up to 10% of ERI, and that it knew about three of the underlying fraudulent transactions—even attaching the deeds of conveyance and assignment consummating those transactions to the demand letter. Compl.,Ex. 6, ECF #1-10. Plaintiffs allege that Razon Jr. strung them along for the next 12 years under false pretenses (including by making settlement offers) to hide the nature of the fraudulent transactions, and that it was not until January 8, 2016, that they learned the Sandiganbayan had not approved any agreement between ERI and the PCGG. Id. ¶¶ 134-37. Plaintiffs also claim they did not obtain a copy of the agreement consummating the 1990 Compromise until late 2016. Id. ¶ 99, n.70.

In March 2016, MFI enlisted the local prosecutor to bring criminal fraud or estafa charges against Razon Jr., commencing Makiling Farms, Inc. v. Enrique Razon, Jr., No. XV-07-INV-lGG-03550 (the "estafa case"). Plaintiffs claim that Razon Jr. has corrupted the local prosecutor, who has refused to indict Razon Jr. for his part in the crimes against ERI and therefore its minority shareholders, including plaintiffs. Id. ¶¶ 142-152. Plaintiffs allege that because Razon Jr. has not been indicted, he "has made a mockery of the Philippine administrative and judicial system." Id. ¶ 142. Plaintiffs accuse the local prosecutor of taking "pains to disregard incontrovertible incriminating evidence," id. ¶ 143, "glossing over and outright ignoring evidence," id. ¶ 144, turning "a blind eye and deaf ear to completely overlook" certain evidence, id. ¶ 145, "directly and arbitrarily ignoring reality," id., and issuing a "bewildering order," id. ¶ 148, that is "[t]ortured and attenuated to the point of unintelligible." Id. ¶ 146. Plaintiffs appealed the local prosecutor's order in the estafa case, id. ¶ 151, and on December 13, 2018, the Secretary for the Philippine Department of Justice denied MFI's appeal. Decl. Román Hernández ¶ 5, ECF #74. A motion for reconsideration of that order is pending.

On May 24, 2018, approximately one month before plaintiffs filed this action, de Borja paid ?100, or about $2, for one share of ERI stock. Deed of Assignment, ECF #44-2. This is the first time de Borja has personally owned any ERI stock. De Borja purchased this stock andbecame president of MFI for the purpose of suing in the United States. Decl. Patrick R. de Borja ¶¶ 9-10 ("I thought that as a [U.S.] citizen I could alternatively file in the [U.S.]. . . I volunteered with my siblings to bring the case the case in the [U.S.] I accordingly assumed leadership as [MFI's] President with a separate ERI share commensurately assigned to me individually.").

Plaintiffs assert twenty-two claims, including fraud, breach of fiduciary duty, civil conspiracy, misappropriation, and conversion. Plaintiffs claim they are entitled to their share of ERI and by extension a proportional share of ICTSI for a total of ?1,974,702,430.10, or approximately $37 million. Compl. ¶¶ 120-22.

II. Plaintiffs' Motion to Strike the Declaration of Defendants' Legal Expert

As an initial matter, plaintiffs' motion to strike the declaration of defendants' legal expert, Ramon S. Esguerra ("Esguerra"), should be denied. ECF #49. Both parties assert that Philippine law governs in this dispute, and both parties have submitted declarations of experts in Philippine law. Compl. ¶ 163; Defs.' Mot. 27, ECF #27. Plaintiffs rely on the testimony of retired Philippine Supreme Court Justice Jose Armando R. Melo ("retired Justice Melo"). ECF #43. Defendants' legal expert, Esguerra, is a lawyer who has been practicing law in the Philippines since 1980. Esquerra Decl. ¶ 3, ECF #32. He is the managing partner of a law firm that handles a wide variety of cases, as well as a law professor and professional lecturer. Id. ¶ 4. He has served as chair and president of the Intellectual Property Association of the Philippines, governor of the Integrated Bar of the Philippines, national director of the Bar's Commission on Integrity and Bar Discipline, and an examiner in political and international law for the Philippine bar examination. Id.

Esguerra's testimony is proper under Federal Rule of Civil Procedure 44.1, which provides: "In determining foreign law, the court may consider any relevant material or source,including testimony, whether or not submitted by a party or admissible under the Federal...