Case of the Day: CDM Smith v. Atasi

The case of the day is CDM Smith, Inc. v. Atasi (D. Mass. 2022). CDM is a Massachusetts engineering and construction firm. Khalil Atasi was a senior vice president who managed the company’s operations in Saudi Arabia. Although he was an employee at will, in order to obtain permission to work in Saudi Arabia, he had to have a written employment contract. One was prepared, and among other things, it had an agreement on choice of forum designating the Saudi Labor Committee as the tribunal to decide employment disputes.

CDM terminated Atasi’s employment, and Atasi brought a claim before the Labor Committee, which he won. CDM alleged that Atasi had been paid twice for the same work, and it brought an action against him in Massachusetts alleging unjust enrichment. Atasi argued issue preclusion, pointing to the Saudi judgment.

The main question, then, was whether the Saudi judgment was entitled to recognition. Massachusetts has adopted the Uniform Foreign Money-Judgment Recognition Act, the older version of the uniform law on judgment recognition. CDM argued that Saudi Arabia’s judiciary did not provide impartial tribunals, pointing to evidence that the Saudi courts routinely discriminate on the basis of sex and religion. Atasi argued that whatever the case in Saudi criminal courts, the civil courts and more specifically the Labor Committee were adequate. The judge acknowledged that some cases had previously held, on the basis of undisputed expert testimony, that the labor tribunal was inadequate, for example, because it required the testimony of two male Muslim witnesses. But Atasi had offered an expert declaration stating, somewhat equivocally in my view, that the Labor Committee was fair, while CDM did not offer any expert declaration backing up its claims of bias in the Labor Committee. So the judge found that Atasi had satisfied his burden to show that the Labor Committee, which was the relevant part of the Saudi judicial system for purposes of this case, was systematically adequate. There are three noteworthy aspects of this decision. First, the judge decided to focus on the relevant part of the judicial system rather than the judiciary as a whole, which to me seems defensible. Second, and maybe less defensibly: although the judge made a point of saying elsewhere in the opinion that issues of foreign law are issues of law, not fact, she treated the dueling expert declarations as though she were “weighing the evidence.” She agreed that in other cases courts had found problems, but in this case, she reasoned, the expert declarations favored the party seeking recognition. But if the Saudi law on competence of non-Muslim witnesses or women as witnesses is a question of law, not fact, then why shouldn’t the court instead rely on earlier decisions as precedent, in the absence of any reason to think Saudi law had changed? Third, I am always hesitant about claims of systemic inadequacy brought by companies that choose to do business in the foreign state at issue. The Saudi courts are what they are, and while they don’t live up to our ideas about procedural or substantive fairness, it’s one thing for a stranger to Saudi Arabia to make this point, and another thing for a company that has business operations there to make it. Better, in such cases, to focus on problems specific to the proceeding rather than systemic issues that were, or should have been, well-known to CDM.

CDM also argued that because the evidence in the Saudi proceeding was mostly presented in writing, and not under oath, with limited cross-examination and discovery, the proceedings were not compatible with due process. This was a much weaker argument that failed. Due process in this context does not require the full panoply of American pre-trial and trial procedure.

CDM next argued that the Saudi judgment had been obtained by fraud. But the kind of fraud it suggested was false evidence submitted by its opponent, which the Saudi tribunal credited after the issues were litigated. As the Restatement (Fourth) explains, “False testimony or forged evidence does not by itself provide a basis for nonrecognition because it should have been raised and dealt with in the foreign proceeding.”

Finally (and I am skipping a public policy point that is not so interesting), CDM argued a lack of reciprocity. Massachusetts is one of a very few US states that requires reciprocity as a mandatory condition of foreign judgment recognition. But Atasi provided an example of a Saudi court recognizing a US judgment, and CDM provided no examples of a Saudi court refusing to recognize a Saudi judgment. Thus the decision on reciprocity was easy to decide in Atasi’s favor.

Having found that the Saudi decision was entitled to recognition, the judge then went on to consider what effect its recognition should have. I don’t want to go through the details of the judge’s issue preclusion analysis here. The main point of interest is that the judge applied Massachusetts’s law of issue preclusion. Why? As Section 95 of the Restatement (Second) of Conflict of Laws explains, “What issues are determined by a valid State judgment is determined, subject to constitutional limitations, by the local law of the State where the judgment was rendered.” In more straightforward language, Saudi law should govern the preclusive effect of a Saudi judgment. There might be some question about whether this rule applies in cases involving foreign country judgments rather than sister-state judgments, See Evans Cabinet v. Kitchen Int’l, 593 F.3d 135, 142 n.8 (1st Cir. 2010). To me, it seems pretty clear that once you recognize a foreign judgment, you should treat it like any other judgment, which would mean applying Saudi preclusion rules. Since foreign country judgments are not entitled to full faith and credit, we should put all of the court’s discretion in the issue of recognition rather than in the issue of what follows from recognition. I don’t see any reason to treat foreign country judgments differently from foreign state judgments, once you’ve decided to recognize them. In any case, the judge should, in my view, at least have discussed the issue.

The last issue that I want to cover is the court’s handling of the forum selection clause, which under Atlantic Marine is a forum non conveniens question. The judge noted, correctly, that when the parties have chosen a forum, the court should presume that the forum they chose is adequate. It’s worth noting that (in my view at least) this should play in not just to the FNC analysis, but also into the question of recognition of the foreign judgment. If the parties validly chose the foreign forum, and if there has been no change in the forum since the time of the choice, why shouldn’t the court also presume the adequacy of the forum when one party attacks the forum as inadequate? This is akin to the question that arose in the Chevron/Ecuador case, where Chevron insisted on litigation in Ecuador and then attacked the Ecuadorian forum as inadequate. I wrote about that aspect of the Chevron case years ago, and I think the argument is even stronger here.

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