Panama Processes, S.A. v. Cities Service Co.
61 O.B.A.J. 1934, 796 P.2d 276, 1990 OK 66 (1990)
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Rule of Law:
Under the principle of comity, Oklahoma courts will recognize and give res judicata effect to a valid final judgment from a foreign nation unless it violates fundamental public policy. For choice-of-law purposes, contract disputes are governed by the law of the place of performance, while claims for breach of a corporate fiduciary duty are governed by the law of the place of incorporation.
Facts:
- Before 1965, a Brazilian corporation, Copebras, had three shareholders: Panama Processes, S.A. (Panama), Columbian Carbon Company (a subsidiary of Cities Service Company, or Cities), and Celanese Corporation.
- In 1965, Celanese sought to sell its shares in Copebras.
- To facilitate this, Panama and Cities agreed that Copebras would redeem Celanese's stock, leaving Cities with a 70% majority stake and Panama with a 30% minority stake.
- As a precondition, Panama required assurances from Cities regarding Copebras' future dividend, expansion, and board representation policies.
- Negotiations in New York resulted in a September 7, 1965 letter of agreement in which Cities' predecessor provided these assurances to Panama.
- The following day, the parties executed the agreement for Copebras to redeem the Celanese-owned shares.
- In 1973, Copebras announced transactions that would restrict dividend payments, and Cities informed Panama that it no longer considered the 1965 letter agreement binding.
Procedural Posture:
- In 1973, Panama sued Cities in a New York federal district court for a declaratory judgment, but the claim was dismissed.
- In 1979, Panama again sued Cities in a New York federal district court for breach of contract and fiduciary duty; this suit was dismissed on forum non conveniens grounds, conditioned on Cities accepting jurisdiction in Brazil.
- In 1981, Panama filed the present action in the District Court of Tulsa County, Oklahoma, against Cities for breach of contract and fiduciary duty.
- While the Oklahoma action was pending, Cities filed a declaratory judgment action in Brazil in 1983.
- In 1984, the Brazilian trial court issued a final judgment for Cities, declaring the 1965 letter agreement unenforceable; this was affirmed by a Brazilian appellate court.
- The Oklahoma trial court granted partial summary judgment to Cities on the contract claim, giving res judicata effect to the Brazilian judgment.
- The Oklahoma trial court then granted summary judgment to Cities on the remaining fiduciary duty claim.
- Panama, as appellant, appealed the summary judgments to the Supreme Court of Oklahoma.
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Issue:
Does an Oklahoma court err by (1) recognizing a prior Brazilian judgment that found a contract unenforceable, under the doctrine of comity, and (2) applying Brazilian law to determine the existence of a fiduciary duty between shareholders of a Brazilian corporation?
Opinions:
Majority - Opala, Vice Chief Justice
No. The trial court did not err in recognizing the Brazilian judgment or in applying Brazilian law to the dispute. Under the doctrine of comity, Oklahoma courts will recognize valid foreign judgments, and the Brazilian judgment here was final and rendered after a fair, contested proceeding. Panama's arguments that recognition violates public policy or due process fail; an interlocutory ruling by the Oklahoma trial court does not preclude a foreign court's final judgment, and mere differences in legal procedure do not render a foreign system fundamentally unfair. Regarding the choice of law, Oklahoma statutes direct that contract disputes are governed by the law of the place of performance, which in this case was Brazil, as the agreement concerned the operations of a Brazilian corporation. Likewise, under the internal affairs doctrine, the law of the state of incorporation—Brazil—governs claims of fiduciary duty between shareholders. Because Brazilian civil law does not recognize the Anglo-American concept of a fiduciary duty and any statutory claim was either barred by res judicata or required a derivative action not brought here, summary judgment for Cities was appropriate.
Analysis:
This decision reinforces the strong judicial policy in the United States of granting comity to foreign judgments, even those from civil-law jurisdictions with procedures that differ significantly from the American system. It establishes that mere procedural differences are insufficient to deny recognition on due process grounds. The case also clarifies Oklahoma's choice-of-law framework, affirming the primacy of the statutory 'place of performance' test for contracts and applying the widely accepted 'internal affairs doctrine' for corporate governance disputes. This holding promotes predictability in international commercial litigation by signaling that parties engaging with foreign entities will likely be subject to foreign law and the jurisdiction of foreign courts.
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