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CLASS ACTIONS IN MEXICO





By Alejandro Osuna




In 2012, important changes made to Mexico's Federal Code of Civil Procedures came into effect providing for class actions. Generally, under the new rules a Class Action, a group of individuals of at least thirty who share a common factual background may file a lawsuit against a provider of goods and services, or against a polluter, and may obtain injunctive relief in the form of an order to cease and desist, and in some cases, damages. The changes should be looked at in a broader scope, as part of a general movement to provide adequate access to justice. For example, during 2011, the Mexican Constitution suffered important changes and now provides for the direct incorporation of human rights as acknowledged in international treaties. Also, the procedure to defend against constitutional violations committed by the State known as the “amparo” (literally, “protection”) has been amended to provide for some class action effects, though still pending is the publication of the new “amparo” Law. The procedural rules incorporating class actions in Mexico provide that non-profit organizations and a group thirty individuals must sign on in order for proceedings to commence. This is what is known as the “opt-in” type of Law, where only those actively involved in the litigation are deemed part of the class. The U.S., provides for what is known as an “opt-out” type rule, which means that all falling within a certain category are deemed part of the class, unless they voluntarily file a motion to be excluded for the class.


What rights may be enforced?

Under the Federal Code of Civil Procedures, a class action may be brought to enforce Diffuse Rights, Collective Rights, and Homogeneous Individual Rights. These are explained as follows:

Diffuse rights are those that may not be divided amongst the persons that benefitted by them. An example would be environmental and consumer protection rights, such as the right to a healthy environment or honesty in advertising. What is characteristic is that it is an unidentified group without any previous links, who are only connected because of a specific event. Take for example, a condo development that neighbors a bar that puts out music at huge volumes, a problem that is often complained about in some Baja California developments. Imagine a neighborhood adjacent to a fish flour plant that produces nauseous odors. In any of these cases, a class action could be brought to obtain injunctive relief to cause these environmental pollutants to turn their volumes down or to install filters. These diffuse actions would not provide damages these would have to be prosecuted individually by any person that can show he has suffered an injury that can be monetarily compensated. Collective rights are those where the members of the group are linked to each other, or to the opposing party, by a prior common relationship. The class is more definite than the members of a group seeking enforcement of diffuse rights, for example, the charging of excessive fees from a phone company, or an insurance company that refuses to cover certain diseases, which affects the collective rights of their clients. The common element here is the fact that there is contractual relationship linking all class members to the opposing party. “Homogeneous individual rights”, which are divisible individual rights with a common origin. As defined in the Law, these are rights whose enforcement may be sought to enforce individual rights and interest, derived from common circumstances, whose purpose is to obtain from a third party the specific performance of a contract or its rescission with all of the legal consequences per the applicable law. An example can be the pollution of a bay, there are inhabitants that may have been injured by the pollution, while other people might have developed health problems, while fishermen or landowners may have suffered property damage. There is a common origin, though not necessarily a common result. The common origin is not necessarily a single event: it may be conduct dispersed in time and space, provided that the facts are so intimately related that they are considered one and the same. The group could file a Diffuse Class Action the complaint and demand relief in the form of an injunction to stop the bar from putting out such loud music. Another aspect worth noting is the fact that the changes made to the Constitution and the Federal Rules make class actions a Federal question, thus granting the District Courts exclusive jurisdiction. The question as to whether States that enacted class actions statutes prior to the changes will survive.


Standing to sue

Under the rules in the Federal Code of Civil Procedures, there are three groups that may institute class action proceedings in Mexico. The first group is comprised of Government watch-dog agencies charged with consumer, environmental, financial services and anti-trust supervision, as well as the Federal Attorney’s Office. The second group is that which is comprised of at least thirty individuals that have a claim. Finally, the third group are NGO’s that were created to defend the rights they which to assert as a class.


The Opt-in Rule

In the US a party to a class action is one that falls within an identifiable group of individuals, regardless of whether the affecter party has willingly filed a complaint. If a person falls within this group, he may opt out of the action. Under the Mexican Rules for class actions, only those parties who are directly are part of the complaint. If a person wishes to join, he or she must file a request to become a part of the action.


Statute of Limitations

Under the Federal Procedures Code, there is a three and a half year statute of limitations to file a class action. If the injury is one of continuous nature, the period shall begin to lapse as of the last date on which the wrongful conduct took place. Are class actions new to Mexican Legislation? For many years, the Federal Consumer Protection Law provided for collective of class actions, but this procedural device was seldom used, since only the Director of this Agency had exclusive standing to sue. In fact, there were some decisions handed down by Federal Courts involving cases filed by the General Attorney for Consumer Affairs, who had prosecuted cases against real estate developers, airlines, and mobile phone companies based on the Federal Consumer Protection Law. There were also some collective actions that could be instituted by Agrarian Communities under Mexico´s Agrarian Law.
The Relief Available in Class Actions

Under the new legislation, the Federal Courts are required to decide the cases based on the Law. However, the judge may order that things be returned to the status quo ante, if this is possible. This return of things to the previous state may consist in the performance of one or more actions or an order to desist. In cases where returning things to their previous condition is not possible, the Judge shall order for substitute performance, in accordance with the affected rights. The amount that is so ordered shall be deposited in a Fund to be administered by the Federal Judicial Council, to be used to cover expenses incurred in these cases including legal fees.





Evidentiary Issues

Under the new rules, the Judge may receive all kinds of evidence that is obtained from any person, document or thing, either ex-parte or ex officio, provided that it has an immediate relation to the disputed facts. A judge may also order, at his discretion, the production of information or means of evidence that is necessary to better decide the case or in order to enforce his decision. Additionally, a Judge may take into account statistical information, or actuarial, or of any other means scientific means. The judge may also take into account the statements, written or verbal, made by third parties who appear as amicus curiae, or in any other capacity, provided that their submission is relevant to the matter of the dispute, and that the third parties do not have a conflict of interest regarding the parties. It is not required that each member of the class submit their individual evidence. Individual monetary claims shall be made by each member filing his own separate motion which includes a liquidated amount of the money he claims he is owed.

For additional reading, we suggest: “Class Actions in Brazil: A Model for Civil Law Countries”, by Antonio Gidi, The University of Houston Law Center.



Punitive damages in mexico: mexican supreme court upholds decision that ordered a hotel operator to pay $2.4 million dollars in a wrongful death case and recognizes punitive damages



By Alejandro Osuna



On February 26 of 2014, the First Chamber of the Mexican Supreme Court issued a historic decision recognizing punitive damages as part of the compensation that a Mexican Court may award to the victims of a serious tort. The background to the decision is as follows: In September 2010, a young man by the name of Angel Sinué traveled to the City of Acapulco to stay at the Mayan Palace Resort to enjoy the Mexican Independence Day Holiday. Angel and his friends were kayaking in resort’s artificial lake when his kayak turned over. Unfortunately, an underwater water pump that had not received maintenance for many years had caused the artificial lake to become electrified. Twenty minutes would pass before resort employees would shut down the electricity to allow for Angel to be rescued from the pool. Unfortunately, by the time he was removed, Angel had no vital signs. Angel’s parents sued in court seeking compensation for moral damages.


The concept of moral damages is specific type of injury to one’s self esteem, affections, relationships, etc., and shares some similarities to pain and suffering under the common law system. During the past few years, the Mexican Supreme Court and the Federal Judiciary had been removing the caps to compensation for moral damages, which in many states are still limited to one third of monetary damages. The Federal Judiciary has consistently ruled that the cap is unconstitutional because it does not allow for just compensation, and because moral damages can be suffered regardless if any other type of injury is caused.


The Mexican Supreme Court had also ruled that the purpose of damages is to bring things to the status quo ante, and if this is impossible, a court may order an indemnity to be paid as compensation for the injury caused. What is novel about the Mayan Palace decision is that the Mexican Supreme Court has formally introduced the common law concept of punitive damages into the Mexican legal system. The majority of the First Chamber of the Mexican Supreme Court found that “just compensation” should compensate the victim in a manner to satisfy her need to see the requirements of justice satisfied. Compensation should also have a dissuasive effect as a means to deter future illicit behavior. It is worth noting that the decision cites US law review articles discussing punitive damages. In its analysis, the First Chamber of the Mexican Supreme Court found that the payment of reparations would simply cause tort-feasor to become unjustly enriched, the rational being that negligent conduct is often times the result of avoiding the cost of complying with certain duties. Additionally, that punitive damages seek to prevent similar events from occurring in the future, particularly with regard to those businesses that have an obligation to protect the life and physically integrity of their clients.


The Test to Determine the Proper Quantum of Compensation

The Mexican Supreme Court proposes a two-step approach to determine the quantum of compensation for moral damages: A) The Qualitative Aspect As part of this first step, a court is required to analyze the type of injury caused. In the Mayan Palace case, the victims claim was they had suffered psychological harm as a result of the loss of their only son, as was evidenced by various psychological evaluations performed on the plaintiffs. As second aspect of this first test is that the court be ascertained of the existence of harm and its severity. In the instant case, the First Chamber found that it is unquestionable that the loss of a son produced an emotional injury. B) The Monetary Aspects The third aspect of this first step is to consider the proper monetary compensation. In the Mayan Palace case, the Court found that psychological therapy for three years would be required, and that the cost for both parents, would be of $259,000 pesos (approximately $20,000 US Dollars). Regarding the defendant, the First Chamber found that it had a high degree of responsibility, not just to the victim, but to other guests staying at the resort, and that it had placed other guests staying at the resort at risk because of its negligent conduct.


The First Chamber also considered that the resort did not have any sort of protocols in place to address emergency situations such the one in which a guest lost his life, as evidenced by the fact that it took over twenty minutes before he electricity was shut down, and the first-aid was provided by other guests. The First Chamber further noted that even after the victim had been removed from the artificial lake, another twenty minutes would transpire before he would be taken to the resorts infirmary. The First Chamber further took into account that the doctor employed at the resort did not even accompany the victims to the hospital, and that the in-house medic failed to advise the paramedics that the victim had no vital signs. The First Chamber found that the high economic status of the tort-feasor was to be taken into account, the severity of the injury and the negligent behavior of the operator should cause that the quantum of the indemnity be equally severe, and ordered that the amount of $30,000,000 pesos ($2.4 million dollars) where to be paid out to the plaintiffs. Though the decision was voted by all the justices of the First Chamber, two separate opinions were issued questioning the insufficient guidelines for future cases, and for having incorporated punitive damages as a part of the notion of just compensation when these should be extraordinary in nature, in cases that involving gross negligence.


Possible Ramifications

The Mayan Palace decision will likely invite for litigation in Mexico in those cases involving tort (responsabilidad civil), which had been relatively scarce because the amounts involved had historically been low. Tort victims and their lawyers would have typically used the criminal system as a means to obtain reparations from tort-feasors, since often times torts can also be classified as criminal conduct.


Unfortunately, the Mexican criminal justice system is often used to extort money in bogus cases. The shift from criminal to civil litigation, and the potential to obtain punitive damages opens the door for an active practice in the field of tort litigation in Mexico. Other ramifications is that enforcing foreign judgments in Mexico (particularly from the United States) that have a punitive damages element has now been made easier. There had been a historic concern that only compensatory damages and not punitive damages were enforceable, but the Mexican Supreme Court has now opened the door and clarified the issue regarding their enforceability to a great extent.



enforcing foreign judgments in mexico



By Alejandro Osuna



Introduction

A couple of years ago, I was asked to a look at the possibility of enforcing a U.S. Judgment derived from a verbal Joint Venture between a Mexican National and a Citizen of the United States. Unfortunately, I had to break the news: The Judgment was unenforceable. The problem was an issue of jurisdiction --in my opinion, the action was in personam, and therefore, Mexican Procedural provides that in these cases, the action needs to be brought before the courts with jurisdiction, which is either the domicile of the defendant or the place where the contract was performed or should have been performed. There was no part of the contract that had to be performed in the U.S.


Additionally, because there was no written contract, there obviously no written clause designating U.S. Courts as those with jurisdiction over the case. Under Mexican law, parties to a contract can validly include a choice of fórum clause, provided that it designates a Court where either one of the parties has its' domicile, or where the contract is to be performed, and that the parties include laguage whereby they expressly waive the right to appear before any other fórum.


Another big issue was the fact that the Plaintiff had not served Defendant in Mexico in a manner consistent with local laws, or under the Hague Service Convention, or the Interamerican Convention on service of Process. They had sent a US process server across the border to hand-deliver the complaint, a method that in my experience can be held to be invalid. The only way this issue could have been overcome, is if the defendant had appeared before the US courts to file a response, without making a special appearance contesting jurisdiction.


Prepare if you Expect to Enforce your Judgment in Mexico

What should you look for when suing a Mexican Plaintiff? Because Mexico has 32 States, Mexico City (formerly known as the Federal District), each with its own Procedural Codes, in addition to a Federal Code of Procedures and a full Chapter in the Commerce Code discussing the enforcement of judgments, I will discuss the rules on enforcement based on the general principles found in these statutes.


Jurisdiction, Jurisdiction, Jurisdiction....

Yes. It may seem obvious, but I've seen many cases where the last thing the US lawyer looked at was whether the jurisdiction the US Court had was one that Mexican Courts consider adequate. Under Mexican rules of procedure, a Court may have jurisdiction in the place where performance was due under a contract, thus excluding tort cases because of their extracontractual nature. In these cases --and absent a contract--, you have to sue a Mexican defendant before the Courts in Mexico. Mexican principles of procedural Law state that if the parties make a contract that includes a choice of court clause, it must satisfy the following requirements for it to be effective: 1) the choice of court has to be: a) either the place of business of the Plaintiff or of the defendant b) place of performance of an obligation due under the contract 2) The clause must include a waiver to the parties rights to their court. Absent this "language", you will probably get jurisdiction, but you may not get a judgment that is worth the paper it is written on. Sometimes, --more often that you imagine--, a Mexican defendant will rush to a U.S. and will not make a special appearance, and simply responds. In this case, it would be understood that the defendant has submitted himself to the jurisdiction of the foreign court. In a case I was involved with to recognize a foreign judgment, the defendant not only appeared after being deffectively summoned, but he filed a counterclaim, making it hard to argue that the US Court had no jurisdiction.


The Checklist: Things that a Mexican Court Will Look at to Determine whether it will or will not enforce a Foreign Judgment.

Under Mexican principles of procedural Law, a Mexican Judge will consider the following:


i) How was the defendant served?

It comes down to a question of international due process. I have seen cases in Tijuana where lawyers in San Diego paid process servers to cross the border into Mexico, and serve defendants. This method is completely invalid under Mexican rules, and in the end, a judgment obtained in this manner may not be enforceable. If you need to serve a Mexican defendant, you can use either The Hague or the Interamerican Conventions on Service of Process, but I strongly suggest you also rely on the Federal Civil Code of Procedures which allows for an attorney in Mexico file the request before the local court to process the Letter Rogatory. Otherwise, you could be looking at a couple of months before you get a lawsuit served.


ii) That the action was not "in rem".

In a nutshell, if the case involved foreclosing on property that was secured in Mexico (mortgage, chattel), it will not be enforced. It's enforcement will also be denied if the foreign judgment declared a person the owner of a piece of property in Mexico. I would note however, that I personally was able to get recognition of a US Judgment issued on a divorce case which granted ownership to a US Citizen of a piece of property in Mexico, in what is known as the "restricted zone", which is the coastal and border regions of Mexico.


iii) That the foreign judge had jurisdiction.

As stated above, the options are a) a contract including a jurisdiction clause with "magic language" or b) performance of the obligation the breach of which was the basis for the action was due in the foreign country. Another option is a defendant voluntarily appearing before a foreign court, failing to contest the foreign courts jurisdiction.


iv) That the lawsuit is not pending in Mexico.

This is the lis pendens exception, and basically, it means that a foreign judgment will not be recognized in Mexico if the same dispute is pending before a Mexican Court. Conclusions First and most importantly, if you plan to file a lawsuit against a Mexican defendant in a foreign court, be sure to get the advice of Local counsel, to be sure that the foreign courts assumption will be recognized in Mexico. Local counsel may be able to provide assistance in effecting service, in a manner that is quicker than going through the diplomatic route, but it the end, it will increase the possibilities of getting your judgment recognized. Our Experience In 2006 we obtained the recognition of a U.S. Judgment rendered in the case Kremen vs Cohen, for the theft of the domain name "sex.com". The judgment was for $65million dollars including punitive damages. The recognition helped us obtain a partial settlement of the case in Mexico.


Are you planning on starting a lawsuit against a Mexican party, or want to enforce a judgment in Mexico? Let us assist you.​



This article is not a substitute for legal advice. If you have particular legal question, do not hesitate to contact us at info@osunalegal.com