International Transactions, Ltd. v. Embotelladora Agral Regiomontana, SA De CV

United States Court of Appeals
Fifth Circuit
F I L E D
October 20, 2003
UNITED STATES COURT OF APPEALS
For the Fifth Circuit
Charles R. Fulbruge III
Clerk
___________________________
No. 02-11280
___________________________
INTERNATIONAL TRANSACTIONS, LTD., A Cayman Islands Corporation,
Plaintiff-Appellant,
VERSUS
EMBOTELLADORA AGRAL REGIOMONTANA, SA DE CV; EMBOTELLADORA AGRAL
DE LA LAGUNA, SA DE CV; AGRAL ARRENDADORA, SA DE CV; AGRAL
COMISIONISTA Y DISTRIBUIDORA, SA DE CV; AGRAL IMMOBILIARIA, SA DE CV;
PEPSI-GEMEX, SA DE CV,
Defendants-Appellees.
Appeal from the United States District Court
for the Northern District of Texas
Before DAVIS, SMITH and DUHÉ, Circuit Judges.
W. EUGENE DAVIS, Circuit Judge:
International Transactions, Ltd. (“ITL”) challenges the dismissal of its action to confirm
an arbitration award against Embotelladora Agral Regiomontana, S.A. de C.V.; Embotelladora
Agral De La Laguna, S.A. de C.V.; Agral Arrendadora, S.A. de C.V.; Agral Comisionista Y
Distribuidora, S.A. de C.V.; and Agral Immobiliaria, S.A. de C.V. (the “Agral Companies”).
The district court dismissed the case based on its conclusion that ITL lacked standing to collect
the arbitration award based on an order of a Mexican bankruptcy court in the insolvency
proceedings of several of the Agral Companies. The Mexican bankruptcy court held that ITL’s
representative, Sharp Capital, Inc. (“Sharp”), had assigned the award to a third party and Sharp
had released any interest it held in the award. The district court concluded that this decision was
entitled to comity and required dismissal of ITL’s claims for lack of standing. Based on our
conclusion that the Agral Companies failed to demonstrate that ITL and/or Sharp was afforded
notice and an opportunity to be heard in the proceedings leading to the Mexican court’s decision,
we vacate and remand.
I.
In May of 1994, ITL made an investment in one of the Agral companies, Embotelladora
Agral Regiomontana, S.A. de C.V. (“Embotelladora”), through Sharp, its undisclosed agent. The
form of the investment was a promissory note with Embotelladora as maker payable to
NationsBank of Texas, N.A. (the “Note”). NationsBank endorsed the Note to Sharp “as
custodian” without recourse. The remaining Agral Companies guaranteed the Note. ITL was not
identified as Sharp’s principal and none of the parties knew ITL was involved in any way in the
investment. The Note contains an arbitration clause and choice of venue clause which requires
enforcement actions to be brought in Texas. The purpose of the loan was to fund the
construction of a Pepsi-Cola bottling plant in Monterrey, Mexico.
In 1996, Agral defaulted on the promissory note. Sharp, at ITL’s direction, initiated
arbitration proceedings against the Agral Companies in Dallas, Texas, in accordance with the
provisions of the Note. On January 17, 1997, Sharp obtained an award against the Agral
Companies in the amount of $11,374,859, with interest accruing at the rate of 18% compounded
daily (the “Award”). ITL was not identified as the unnamed investor in the arbitration
2
proceedings and the Award was granted to Sharp, with no indication that Sharp received the
Award as “custodian”, “agent”, or any other capacity, other than principal. However, the Agral
Companies were aware that Sharp was acting for another because they had sought unsuccessfully
to have the “unnamed and as of yet unidentified investor” added as a party to the arbitration
proceedings in a suit filed in federal court in Texas.
In February 1997, four of the five Agral Companies filed for Suspension of Payments
protection in Monterrey, Mexico, under Mexican law. The proceeding was later converted to a
bankruptcy. At ITL’s instruction, Sharp filed a claim in the bankruptcy proceeding for
confirmation and recognition of the Award. Sharp’s attorney was appointed as provisional
intervenor for the creditors in the Agral bankruptcy. According to the Agral Companies, under
Mexican law, the role of a provisional intervenor is to represent the creditors, similar to the
function of a creditors’ committee under U.S. bankruptcy law.
In August 1998, Sharp, without authority from ITL, assigned the Award and Note to Jose
Trevino Canamar, a Mexican attorney, in exchange for an account of Bridgestone, Inc. and
payment of Sharp’s legal fees. ITL believes that Mr. Canamar is related to Sharp’s president and
is the brother of the attorney Sharp hired to collect the Award for ITL. Nine days later, Mr.
Canamar assigned the Award and Note to Grupo Embotellador Norest, S.A. de C.V. (“GEN”) in
exchange for 55 million pesos, a fraction of the face value of the Award. GEN is an affiliate of
the Agral Companies as they are all third-tier subsidiaries of defendant Pepsi-Gemex.1 On the
same day, Sharp, Canamar, and GEN executed a Master Agreement releasing all claims against
1
ITL argues that Pepsi-Gemex is the alter ego or successor of the Agral Companies. Pepsi-
Gemex filed a motion to dismiss for lack of jurisdiction that became moot by the district court’s
granting of the Agral Companies motion to dismiss.
3
each other and against the Agral Companies. Both assignments were duly notarized and ratified.
At least the first assignment was also filed of record in Mexico.
Because of Sharp’s fraudulent business practices, in November 1998, the Securities and
Exchange Commission brought an action against Sharp and its president in the Northern District
of Texas. A Special Master was appointed for Sharp. Sharp’s president was indicted on fraud
charges and later entered a guilty plea.
In January 1999, Sharp’s claim in the Agral bankruptcy was denied. Based on the
translation in the record, it appears that the ruling was without prejudice and based on the failure
of Sharp to file the Award in a proper form, either a duly authenticated original or certified copy.
In February 1999, ITL filed suit against Sharp in the Northern District of Texas. In
February 2001, in response to an order of the district court in that case, Sharp’s Special Master
conveyed the Award to ITL. ITL then sued the Agral Companies in the 68th Judicial District
Court of Dallas County, Texas, seeking an order confirming the arbitration Award. In June 2001,
the case was removed to the Northern District of Texas, Dallas Division.
In October 2001, GEN, the assignee of the Award, filed a motion in the Mexican
bankruptcy proceeding to dismiss Sharp’s attorney as provisional intervenor. GEN asked the
court to dismiss Sharp’s attorney from this role because Sharp, having assigned the Award away,
was no longer a creditor of the Agral Companies. In a November 2001 ruling, presented in
translation in the record along with the motion being ruled upon, the Mexican bankruptcy judge
found that Sharp was no longer a creditor of any of the bankrupt parties. The basis of the ruling
appears to be a finding that Sharp had assigned away the Award and that under the Assignments,
GEN owned the Note and the Award. Since Sharp was no longer a creditor, its attorney was not
4
a proper provisional intervenor for the remaining creditors, so he was dismissed and a new
intervenor appointed. The motion appears to have been handled on an ex parte basis. Although
by the time the motion was filed the Agral Companies had notice of both ITL’s claim to the
Award and Sharp’s fraudulent activities, ITL received no notice of and was not a party to the
Mexican court’s consideration of this motion. There is also no evidence in the record that Sharp,
as ITL’s representative in the Mexican bankruptcy, had any notice of the motion.
In December 2001, the Agral Companies were merged into GEN. The end result of the
Assignments and the merger was that the debtor under the Award and the purported owner of the
Award became one. The bankruptcy proceedings were dismissed in January 2002.
The Agral Companies submitted the November 2001 order of the Mexico bankruptcy
court as basis for dismissal of this suit. They argued that ITL lacked standing to pursue collection
of the Award because the Award had been assigned to GEN in 1998, and because applying the
principles of res judicata and international comity, the 2001 order of the Mexican should be
considered as conclusive on the question of ownership of the Award.
The district court granted the motion to dismiss for lack of subject matter jurisdiction for
lack of standing on grounds of international comity. The court examined affidavits and other
evidentiary materials submitted by the parties in making its ruling. After noting that standing
requires an injury-in-fact, causation and redressability, the court found that ITL had sustained an
injury-in-fact by its inability to collect the Award. In addressing the issue of redressability, it
found that a judgment confirming the Award would not redress ITL’s injury because (1) the
Award had been assigned to Canamar and then to GEN, (2) Sharp, Canamar, and GEN released
all claims against each other and the Agral Companies, and (3) the assignments were valid based
5
on the November 2001 decision of the Mexican bankruptcy court. ITL appeals.
II.
The district court correctly identified the three requirements for Article III standing: (1) an
injury-in-fact, which is a concrete invasion of a legally protected interest; (2) a causal connection
between the injury and the defendants’ conduct; and (3) a substantial likelihood that the injury will
be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61
(1992). The Agral Companies argue that there are three bases on which ITL should be denied
standing: (1) ITL’s injury is not redressable because the relief it seeks, an order confirming the
Award, will not help ITL because the Award was validly assigned to GEN; (2) ITL’s injury is not
redressable because an order confirming the Award will not help ITL in light of the Mexican
court’s finding that the Award was validly assigned to GEN, which decision is entitled to comity
in this court; and (3) no causal relationship exists between the actions of the Agral Companies and
the alleged injury, which is inability to collect the arbitration Award, because that harm was
caused by Sharp by the first assignment to Canamar or by executing the Master Agreement.
The district court’s decision to deny standing is reviewed de novo. Robison v. TCI/US
West Communs., 117 F.3d 900, 904 (5th Cir. 1997). The court’s decision to grant comity to the
Mexican bankruptcy court’s ruling is reviewed for abuse of discretion. Allstate Life Ins. Co. v.
Linter Group, Ltd., 994 F.2d 996, 999 (2d Cir. 1993), cert. denied, 510 U.S. 945 (1994). The
district court’s decision to accept, under principles of comity, the Mexican bankruptcy court’s
finding that Sharp’s assignment of the Award to Canamar and Canamar’s assignment to GEN
were valid is the focus of this appeal. We now turn to that issue.
6
III.
Comity is "the recognition which one nation allows within its territory to the legislative,
executive or judicial acts of another nation, having due regard both to international duty and
convenience, and to the rights of its own citizens or of other persons who are under the protection
of its laws." Hilton v. Guyot, 159 U.S. 113, 163-64, 40 L. Ed. 95, 16 S. Ct. 139 (1895). The
rationale underlying the grant of comity to a final foreign money judgment is similar to that
underlying the application of res judicata to domestic judgments. Essentially, once the parties
have had an opportunity to present their cases fully and fairly before a court of competent
jurisdiction, the results of the litigation process should be final. Cunard S.S. Co. v. Salen Reefer
Services AB, 773 F.2d 452, 457 (2d Cir. 1985); Moore’s Federal Practice, § 131.11[1]. As
applied to a bankruptcy proceeding, the extension of comity “enables the assets of a debtor to be
dispersed in an equitable, orderly, and systematic manner, rather than in a haphazard, erratic or
piecemeal fashion.” Cunard, 773. F.2d at 457-58. Businesses, like ITL, that voluntarily deal with
foreign entities impliedly subject themselves to the laws of the foreign government under which
the corporation is organized which may affect the powers and obligations of that corporation. Id.
at 458. While a foreign court may not render a binding money judgment against one over whom
it has no jurisdiction based solely on one’s dealings with a foreign corporation, a creditor of an
insolvent foreign corporation may be required to assert its claims before a duly convened foreign
bankruptcy tribunal to preserve claims against a foreign bankrupt. Id.
Under principles of international comity, a foreign court’s judgment on a matter is
conclusive in a federal court when (1) the foreign judgment was rendered by a court of competent
jurisdiction, which had jurisdiction over the cause and the parties, (2) the judgment is supported
7
by due allegations and proof, (3) the relevant parties had an opportunity to be heard, (4) the
foreign court follows procedural rules, and (5) the foreign proceedings are stated in a clear and
formal record. Hilton, 159 U.S. at 159. Comity is an affirmative defense and the parties urging
comity - the Agral Companies in this case - have the burden of proof on the issue. Allstate, 994
F.2d at 999. Although ITL challenges the district court’s decision on comity on several grounds,
the critical question is whether ITL had notice and an opportunity to be heard in the Mexican
bankruptcy court on its claim to the Award. Answering that question requires an analysis of what
type of notice is required for this purpose.
Under the law of the United States, a foreign judgment cannot be enforced in a U.S. court
unless it was obtained under a system with procedures compatible with the requirements of due
process of law. Hilton, 159 U.S. at 205-06, 16 S.Ct. at 159; Bank Melli Iran v. Pahlavi, 58 F.3d
1406, 1410 (9th Cir. 1995), cert. denied, 516 U.S. 989 (1995). Notice is an element of our
notion of due process and the United States will not enforce a judgment obtained without the bare
minimum requirements of notice. Ma v. Continental Bank, N.A., 905 F.2d 1073, 1076 (7th Cir.
1990), cert. denied, 498 U.S. 967 (1990). One commentator has stated the standard thus: “[t]he
polestar is whether a reasonable method of notification was employed and reasonable opportunity
to be heard was afforded to the person affected.” Somportex, Ltd. v. Philadelphia Chewing Gum
Corp., 453 F.2d 435, 443 (3d Cir. 1971), citing Restatement (Second) Conflict of Laws, § 92
(Proposed Final Draft), 1967.
While there is no requirement that Mexican law be identical to U.S. bankruptcy law, the
notice requirements in our law give us some guidance as to what notice would satisfy our concept
of due process. Allstate, 994 F.2d at 999. The U.S. Bankruptcy Code defines the phrase “after
8
notice and a hearing” and similar phrases as requiring such notice and hearings as are appropriate
under the particular circumstances. 11 U.S.C. § 102(1)(A). These terms permit flexibility
regarding the occasions in which a full hearing is required, while insuring that all persons who
should have notice receive it. Collier on Bankruptcy, (15th ed.) ¶102.02. Parties in interest must
receive notice and an opportunity to be heard before their interests may be adversely affected.
Western Auto Supply Co. v. Savage Arms (In re Savage Indus.)., 43 F.3d 714, 720 (1st Cir.
1994). In addition, the flexible notice allowed by section 102(1)(A) does not allow ex parte relief
in the absence of specific findings demonstrating that such action is appropriate under the
circumstances. If an ex parte proceeding is deemed necessary, a reasonable effort is required to
give advance notice to parties in interest. Collier on Bankruptcy, (15th ed.) ¶102.02[1], fn.6.
ITL clearly qualifies as a party in interest, which class includes a creditor (like ITL), as well as any
other person with a sufficient stake in outcome of a proceeding so as to require representation. In
re Am. Appliance, 272 B.R. 587 (Bankr. D.N.J. 2002).
There is no dispute that ITL had notice of the Agral bankruptcy, both actual and
constructive, through its agent Sharp. The Agral Companies argue that because ITL had notice
of their bankruptcy proceeding, ITL cannot complain of lack of notice because it failed to file a
claim. We disagree. Although ITL did not file a claim for the Award under its own name, it
clearly did file a claim in the Agral bankruptcy through its agent, Sharp.
Even though neither Sharp nor ITL was given notice of the motion, the district court
appeared to charge ITL with notice because ITL was aware of the pendency of the bankruptcy
proceedings in which the motion was filed. ITL contends that it (either through Sharp or
directly) was entitled to notice of the particular motion to dismiss Sharp’s attorney as provisional
9
intervenor based on Sharp’s assignment of the award. ITL’s position is more consistent with our
concept of due process and with case law on this issue. U.S. bankruptcy law speaks of notice to
parties in interest in terms of notice of particular proceedings within the larger bankruptcy
proceeding of the debtor. For example, Rule 3007 fixes requirements for notice of an objection to
a claim. See also In re Bumper Sales, Inc., 907 F.2d 1430 (4th Cir. 1990)(Secured creditor's
motion to condition use, sale, or lease of cash collateral and proceeds is "case" as term is used in
11 U.S.C.S. § 1109(b), rather than adversary proceeding; therefore, unsecured creditors'
committee has standing to be heard.); Remington Rand Corporation v. Business Systems, Inc.,
830 F.2d 1260 (3d Cir. 1987)(Parent corporation that did not file a claim in foreign bankruptcy
proceedings of its subsidiary was not required to monitor activity in that case, including motion
and order to sell assets of the debtor, to protect its rights to intellectual property licensed to the
bankrupt sub.) We conclude that, having filed a claim in the Agral bankruptcy proceeding, ITL or
Sharp was entitled to notice of GEN’s motion to replace Sharp’s attorney as provisional
intervenor because a decision on that motion clearly would affect ITL’s claim in the bankruptcy.
Under the facts of this case, we need not discuss the precise level of due process required
to be given to ITL, as the record does not indicate that any notice was given. We see nothing in
the record, the district court’s opinion or any of the briefs which supports a conclusion that this
motion was not handled, as ITL claims, on an ex parte basis.
We fully accept that ITL would be bound by notices issued in the bankruptcy proceeding
to its agent, Sharp, and that ITL’s obligation to act to preserve its rights did not stop with the
filing of the claim by Sharp. No later than November 1998, ITL should have been on notice that
Sharp could no longer be trusted to advance its interests since the SEC had appointed a Special
10
Master to oversee Sharp’s affairs. ITL also had some notice, though perhaps not timely, of the
January 1999 ruling in which the Mexican court denied Sharp’s claim for lack of proof. In its
Motion to Dismiss filed in this case in July 2001, the Agral Companies stated that “[t]he Mexican
insolvency court has already ruled on Sharp Capital’s application for enforcement of the arbitral
award at issue here,” referring to the January 1999 ruling on Sharp’s claim. There is no indication
in the record that ITL took any action in response to these facts to protect its claim before the
Mexican bankruptcy court, for example by withdrawing Sharp’s authority to act on its behalf or
to substitute an alternative representative. However, based on the record before us, we cannot
determine that any lack of diligence by ITL had any affect on the failure of the Mexican court to
give notice of the motion to Sharp.2 The Mexican court apparently signed the order removing
Sharp as provisional intervenor ex parte without giving notice of GEN’s motion to any interested
party.
Accordingly, the Agral Companies have failed to meet their burden of proof that ITL was
afforded an opportunity to be heard in the Mexican court on the issues underlying the motion to
dismiss Sharp as intervenor that the Agral Companies seek to enforce in this court. In these
circumstances, we conclude that the district court abused its discretion in accepting that ruling
under principles of comity.
IV.
Based on the above outlined facts, the Agral Companies did not meet their burden of
proof on the defense of comity, because they did not demonstrate that ITL (or its representative)
2
We cannot say that notice to Sharp and its fraudulent principals would not have been
transmitted to ITL. At the time the motion was filed, a special master appointed by the S.E.C. was
in place to oversee Sharp.
11
was afforded notice and an opportunity to be heard on the motion to dismiss the provisional
intervenor on grounds that ITL’s agent validly assigned the Award. The district court abused its
discretion in applying comity to the Mexican Bankruptcy court’s order granting the motion and its
implicit holding that ITL had no interest in the Award. The district court did not reach the
alternative arguments of the parties and did not rule on whether the assignments were valid or on
the Agral Companies’ causation challenge to ITL’s standing. The district court should consider
these arguments including any factual issues necessary to resolve them in the first instance.
Accordingly, we vacate the district court’s judgment and remand this case to the district court for
further proceedings consistent with this opinion.
VACATED and REMANDED.
12
JERRY E. SMITH, Circuit Judge, dissenting:
I respectfully dissent. Although this may be a fairly close
question if examined de novo, by no stretch of the imagination
did Chief Judge Fish abuse his discretion in granting comity to
the decisions of the Mexican bankruptcy court.
The salient facts are these: In 1996, ITL had contemporane-
ous actual knowledge of Agral’s default and of the arbitration.
In 1997, ITL had contemporaneous actual knowledge of the award,
of Agral’s bankruptcy, and of Sharp’s proof of claim in the
Mexican bankruptcy court. ITL chose not to reveal itself but
instead to rely on Sharp as its collection agent. ITL knew of
Sharp’s fraud no later than February 1999, when it joined the
SEC’s enforcement action, and probably by November 1998, when the
SEC first sued Sharp.
ITL had and declined three opportunities to protect its own-
ership of the award in the Mexican bankruptcy court: (1) in Feb-
ruary 1997, when it instructed Sharp to file its claim in that
court; (2) in November 1998 or February 1999, when it joined the
SEC’s enforcement action; and (3) in June 2001, when it sued
Agral in Texas state court to enforce the award. When, in
October 2001, GEN asked the Mexican bankruptcy court to confirm
its ownership of the award, GEN likely knew that ITL also claimed
ownership and that Sharp no longer acted as ITL’s agent.
The critical question on appeal is whether ITL had an oppor-
tunity to be heard in the Mexican bankruptcy court. Comity “is
not a rule of law, but one of practice, convenience, and expedi-
ency.” Overseas Inns S.A. P.A. v. United States, 911 F.2d 1146,
1148 (5th Cir. 1990). American federal courts should grant
comity to a foreign court’s decision where the foreign court had
jurisdiction and used civilized procedures, its judgment was
supported by due allegations and proof, the parties had an
opportunity to be heard, and a grant of comity would not preju-
dice American interests. Id. (quoting Hilton v. Guyot, 159 U.S.
113, 205-06 (1895)). ITL does not seriously dispute any element
other than its opportunity to be heard.3
ITL and Agral further reduce this dispute to when and on
what ITL had an opportunity to be heard. ITL admits that it had
multiple opportunities to be heard over the course of the Agral
bankruptcy proceedings, but not on GEN’s specific motion to
confirm ownership of the award. Agral admits that ITL was not
heard on GEN’s motion, but disagrees that this fact matters on
the issue of comity. Thus, the key issue is whether ITL had a
right to be heard specifically on GEN’s motion or just generally
3
ITL asserts that GEN did not offer sufficient proof to support the Mexican bankruptcy court’s
decision, but the court based its decision on an uncontradicted affidavit. ITL also criticizes the procedures of
the Mexican bankruptcy court. Insofar as ITL criticizes Mexican justice in general, American courts disagree.
See, e.g., Vasquez v. Bridgestone/Firestone, Inc., 325 F.3d 665, 671-72 (5th Cir. 2003); Gonzalez v. Chrysler
Corp., 301 F.3d 377, 383 (5th Cir. 2002); In re Blackwell, 267 B.R. 741, 758-59 (Bankr. W.D. Tex. 2001).
Insofar as ITL criticizes the Mexican bankruptcy court’s use of procedures in this particular case, that criticism
relates to ITL’s opportunity to be heard, not to the fairness of Mexico’s procedural rules in general.
14
in the bankruptcy proceedings.4
There is essentially no law from the Fifth Circuit or other
courts of appeals on this obscure question. We therefore must
apply a fairly abstract standardSSan opportunity to be
heardSSwithout much guidance from precedent. We should revert,
however, to the purposes behind the Hilton test and specifically
its opportunity-to-be-heard element. The test encourages respect
for foreign courts (in hope of reciprocal respect), discourages
protracted re-litigation of the same dispute, and ensures proce-
dural fairness for the aggrieved party.5
With these purposes in mind, we should affirm the grant of
comitySSand certainly should do so on the ground that the dis-
trict court did not abuse its discretion. American courts often
note the importance of extending comity to foreign bankruptcy
courts, given the nature of insolvency proceedings.6 Further,
ITL (through Sharp or on its own behalf) and Agral have struggled
over the note and then the award for seven years before an
arbitrator, American courts, and Mexican courts.
4
To summarize, whether ITL has standing depends on whether the district court properly granted
comity to the Mexican bankruptcy court, which in turn depends on whether ITL had an opportunity to be heard,
which ultimately depends on whether ITL has a right to be heard specifically on GEN’s motion or just generally
in the bankruptcy proceedings.
5
Finanz AG Zurich v. Banco Economico, S.A., 192 F.3d 240, 246 (2d Cir. 1999); Somportex Ltd.
v. Philadelphia Chewing Gum Corp., 453 F.2d 435, 442-43 (3d Cir. 1971).
6
Allstate Life Ins. Co. v. Linter Group, Ltd., 994 F.2d 996, 999 (2d Cir. 1993); Overseas Inns, 911
F.2d at 1149.
15
Finally, the grant of comity is not procedurally unfair to
ITL. To be sure, ITL was not heard on GEN’s motion. Yet, we
should conclude, as did the district court, that this fact did
not inflict a great injustice on ITL. In a sense, ITL was heard
on the decisive question of its ownership of the award when the
Mexican bankruptcy court denied Sharp’s claim in January 1999.7
Although the Mexican bankruptcy court dismissed Sharp’s claim
based on the 1998 assignments, it probably would have done the
same based on the January 1999 decision as well.8
Moreover, ITL easily could have intervened in the Mexican
bankruptcy proceedings at any time. Instead, it instructed Sharp
to file the claim in February 1997, it sought to recover the
award from Sharp in February 1999 in federal district court, and
it sued Agral to enforce the award in June 2001 in Texas state
court. In fact, after ITL sued Agral in June 2001, Agral repeat-
edly encouraged ITL to join the Mexican bankruptcy proceedings.
ITL, after years of indolence and neglect, can hardly cry injus-
tice now.
Nor does the fraud of Sharp excuse ITL. Although ITL
reasonably might have relied on Sharp in February 1997, it cer-
tainly knew of Sharp’s malefactions by November 1998 or February
7
Even if Sharp had betrayed ITL by January 1999, ITL instructed Sharp to file a claim on behalf of
ITL in February 1997, before any allegation was made against Sharp.
8
Cf. Banca Agricola Mantovana v. Farinacci (In re Enercons Va., Inc.), 812 F.2d 1469, 1472-73
(4th Cir. 1987) (affirming grant of comity to foreign bankruptcy court’s earlier order notwithstanding a later
ex parte order to similar effect).
16
1999, in plenty of time to protect its interests in the Mexican
bankruptcy court.
In sum, the district court reasonably concluded that the
Hilton test requires only an opportunity for ITL to be heard gen-
erally in the bankruptcy proceedings, not specifically on GEN’s
motion. Thus, the district court did not abuse its discretion by
granting comity to the Mexican bankruptcy court’s decision that
ITL did not own the award or by therefore finding that a favor-
able decision would not redress ITL’s injury.
17