Panama Processes, S.A. v. Cities Service Co.

• Decision Date: 17 July 1990
• Docket Number: No. 71598,71598
• Citation: 1990 OK 66,796 P.2d 276
• Parties: PANAMA PROCESSES, S.A., Plaintiff-Appellant, v. CITIES SERVICE COMPANY, Defendant-Appellee.
• Court: Oklahoma Supreme Court

Page 276

796 P.2d 276

1990 OK 66

PANAMA PROCESSES, S.A., Plaintiff-Appellant, v.CITIES SERVICE COMPANY, Defendant-Appellee.

No. 71598.

Supreme Court of Oklahoma.

July 17, 1990.

On appeal from the District Court, Tulsa County; Daniel J. Boudreau, Successor Judge.

In an action for damages brought under two theories of liability, the trial court gave summary judgment to the defendant, concluding that a prior Brazilian declaratory judgment should be recognized according to the principles of comity and that while Brazilian law does apply to the agreement in contest, it does not recognize a fiduciary duty owing by majority to minority stockholders.

JUDGMENT AFFIRMED.

J. Warren Jackman, Regina K. Tetik, Pray, Walker, Jackman, Williamson & Marlar, Tulsa, and Albert I. Edelman, Willis L.M. Reese, and Hans Smit, New York City, for plaintiff-appellant.

Ronald N. Ricketts, Gable & Gotwals and Charles C. Baker, Tulsa, for defendant-appellee.

OPALA, Vice Chief Justice.

The appeal presents four issues for decision: Did the district court err in recognizing a prior Brazilian declaratory judgment?Does Brazilian law apply to the issue whether a majority stockholder owes a fiduciary duty to a minority stockholder? and if so Does Brazil's Civil Law system recognize that majority stockholders owe a fiduciary duty to minority stockholders? and Does Brazilian law permit an individual stockholder's suit against a majority stockholder for breach of a statutory duty?We answer the first, third and fourth questions in the negative and the second in the affirmative.

THE ANATOMY OF LITIGATION

This is an appeal from summary judgment rendered for the defendant, Cities Service Company[Cities], and against the plaintiff, Panama Processes, S.A.[Panama].The dispute involves a Brazilian corporation, Companhia Petroquimica Brasileira-Copebras[Copebras].Before 1965 Coprebras had three shareholders: Panama, Columbian Carbon Company[Columbian] and Celanese Corporation[Celanese].¹Columbian is Cities' predecessor in interest and a wholly owned subsidiary of Cities.Celanese advised Panama and Columbian in 1965 that it wanted to sell its Copebras stock.To accomplish this purpose Panama and Cities agreed that Copebras would redeem the Celanese-owned stock and retire its interest.This redemption effectively reduced the number of shareholders from three to two, with Cities owning 70% and Panama 30% of Copebras stock.As a precondition to the transaction, Panama wanted Cities to provide certain assurances concerning Copebras' future dividend, expansion and board representation policies.Negotiations then occurred in New York between Panama's representative and Cities' counsel, which resulted in a September 7, 1965 letter of agreement outlining these assurances.²The day after the letter was signed, Panama executed an agreement for the purchase and retirement of the Celanese-owned shares in Copebras.

Prior New York Federal Litigation

In 1973, after Copebras announced its intention to enter into transactions that would restrict dividend payments and after Cities advised Panama that it no longer considered the 1965 letter binding, Panama sued Cities in federal court, ³ seeking a declaratory judgment that the letter was a binding contract.The claim was dismissed because the relief Panama sought was inconclusive.⁴

Six years later Panama again sued Cities in federal court, alleging breach of the letter agreement and of a fiduciary duty owed by a majority to a minority shareholder.⁵⁵The court dismissed the suit on grounds of forum non conveniens upon Cities' consent to accept service of process in Brazil and to contest Panama's claims on the merits.⁶

The Present State and Concurrent Brazilian Litigation

Panama commenced this action against Cities in 1981 on two theories of liability--breach of contract ⁷ and breach of fiduciary duty ⁸--in the District Court, Tulsa County.The trial court in 1982 denied Cities' motion to dismiss on grounds of forum non conveniens.⁹Cities then unsuccessfully sought on the same grounds a writ of prohibition in the Oklahoma Supreme Court.¹⁰In 1983, while the Oklahoma action was still pending, Cities, along with Copebras and three wholly-owned Cities subsidiary companies, filed a declaratory judgment action in Brazil against Panama and its Brazilian subsidiary.¹¹The Brazilian trial court held itself competent over Panama's objections that (a) the place of performance of the 1965 letter was to be Oklahoma and (b) an action was pending in an Oklahoma court concerning the same letter.¹²The Brazilian court rendered judgment for the plaintiffs in 1984, holding that the letter was unenforceable.¹³The appellate court affirmed this decision.¹⁴

Cities then moved for partial summary adjudication in the Tulsa trial court on the breach of contract theory, asserting that the Brazilian judgment should be recognized and enforced and that the res judicata doctrine bars relitigation of Panama's breach of contract theory, which had been fully and fairly litigated in the Brazilian court.On January 18, 1988the district court sustained Cities' motion on the basis of comity.The following July it gave summary judgment to Cities on both of Panama's theories of liability.The decision on the status-based prong of the dispute was rested on several grounds (1) Brazilian law applies to this issue; (2) neither Brazilian Corporation Law [Code] nor any other Brazilian law creates a fiduciary obligation of majority to minority shareholders; (3) any recovery for abuse of majority shareholder power must be sought under Article 246 and in accordance with Articles 116 and 117 of the Brazilian Corporation Law; ¹⁵ and (4) an action pursuant to these provisions is derivative, thus a shareholder has no individual cause of action under Brazil's Corporation Law for damages suffered by it as a shareholder.

ITHE BRAZILIAN JUDGMENT IS ENTITLED TO RECOGNITION

The full faith and credit clause of the United States Constitution¹⁶ does not extend to foreign nation judgments, but state courts have the power to recognize them.¹⁷The present trend in the United States clearly favors recognition of foreign nation judgments.¹⁸Strong policies support recognition, ¹⁹ such as the protection of party expectations, prevention of harassment of one party by the other, conservation of judicial resources and promotion of consistency and uniformity of law.²⁰

This trend parallels the Restatement (Second) of Conflict of Laws§ 98, which states that

"[a] valid judgment ²¹ rendered in a foreign nation after a fair trial in a contested proceeding will be recognized in the United States so far as the immediate parties and the underlying cause of action are concerned."

ATHE PUBLIC POLICY DEFENSE

Panama argues that the Oklahoma court's assertion of jurisdiction over this case precluded the Brazilian court from simultaneously hearing the declaratory judgment action.It further asserts that the May 19, 1983 denial of Cities' general and special demurrers to its two theories of recovery is a final adjudication of the enforceability and validity of the 1965 agreement and operates to bar relitigation of that issue by the trial court.Recognizing the Brazilian judgment under these circumstances, Panama argues, would violate the public policy of Oklahoma.

A foreign-country judgment may be denied recognition when it is contrary to the crucial public policies of the forum in which enforcement is requested.²²This rule concedes that a state is not required to give effect to foreign judicial proceedings grounded on policies which do violence to its own fundamental interests.In the Restatement (Second) of Conflict of Laws, Comment c, the drafters explain that the original claim must not be "repugnant to the fundamental notions of what is decent and just in the State where enforcement is sought."²³The standard for refusing to enforce judgments on public policy grounds is narrow in scope; the present trend has been to recognize this defense only in exceptional cases.²⁴We find no basis here for invoking a public policy defense to preclude recognition of the Brazilian judgment.

Under the doctrine of res judicata, ²⁵ only terminal judicial rulings--whether they be judgments or postjudgment dispositions--are given preclusive effect.²⁶A prejudgment order that overrules or sustains a demurrer to a pleading under the pre-1984 Oklahoma pleading regime does not bear the attributes of a complete and final disposition entitled to res judicata effect.²⁷

The principle of concurrent jurisdiction applies here.Where a similar controversy between the same parties is pending in separate jurisdictions, each forum is generally free to proceed to a judgment.The first final judgment would be res judicata as to issues that were or could have been raised in that action.²⁸The important principles of comity compel deference and mutual respect for concurrent foreign proceedings.²⁹Because the Brazilian court's final judgment was the first to be rendered, it is conclusive as to the underlying cause of action and will be accorded res judicata effect.

Panama asserts that the Brazilian judgment dealt with Brazilian activities and entities that were parties neither to the 1965 letter nor to the Oklahoma litigation.This argument attempts to separate the facts of the two proceedings when they are inextricably entwined.It is immaterial that there were more parties in the Brazilian litigation than in the present action.³⁰Res judicata applies to bar relitigation of Panama's claim because both proceedings arise out of the same set of events and the same parties in the Oklahoma litigation were also parties in the Brazilian lawsuit.

Even if the Brazilian court had misperceived the choice-of-law doctrine, that would not create an infirmity in the court's power.The Brazilian judgment cannot be made vulnerable for legal error in the application of law; it is assailable,...