Amicus Curiae Brief — Daewoo Motor America, Inc. v. General Motors Corp., 127 S. Ct. 2032 (2007) (No. 06-926)

MAR 7% 2007

IN THE

DAEWOO MOTOR AMERICA, INC.,

Petitioner,

V.

GENERAL Motors Corp., ET AL.,

Respondents.

On Petition for a Writ of Certiorari

to the United States Court of Appeals

for the Eleventh Circuit

—_—_—----—————-

MOTION FOR LEAVE TO FILE AND

BRIEF OF AMICUS CURIAE

CMA BUSINESS CREDIT SERVICES

IN SUPPORT OF PETITIONER

CORRECTES Cory

: No. 06-926

Supreme Court of the United States

CHRISTOPHER J. WRIGHT *

TIMOTHY J. SIMEONE

STEPHANIE WEINER

HARRIS, WILTSHIRE &

GRANNIS LLP

1200 Eighteenth Street, N.W.

Washington, D.C. 20036

(202) 730-1300

* Counsel of Record

!

MOTION FOR LEAVE TO FILE

Credit Managers Association (“CMA”), which does

business as CMA Business Credit Services, hereby moves,

pursuant to Rule 37.2 of the Rules of this Court, for leave to

file the attached brief as amicus curiae. Consent to the filing

of this brief has been obtained from counsel for the

petitioners. Counsel for respondents have not consented.

With over 2,000 member companies across a broad range

of industries, CMA is a California nonprofit corporation that

provides a full array of business insolvency services.

Among other services, CMA is frequently designated by

bankruptcy courts to serve as secretary to the official

creditors’ committee in reorganization cases. In liquidation

cases, CMA often accepts a general assignment for the

benefit of creditors from the debtor.

In petitioner Daewoo Motor America, Inc.’s (“Daewoo

America”) Chapter 11 proceeding, CMA was appointed

Trustee of the Creditor Trust at the suggestion of petitioner

and with the endorsement of the Official Unsecured

Creditor’s Committee. CMA holds 95% of the stock of

petitioner in trust for, and for the benefit of, the thousands of

consumers and small businesses holding unsecured claims

against the petitioner. Taken together, these creditors have

filed claims for more than $840 million (with an allowed

value of $519 million). As a result of the Eleventh Circuit’s

decision in this case, those claims have very little value.

More generally, in light of the growing

internationalization of business, CMA increasingly faces

issues concerning the effect of foreign proceedings on a

domestic bankruptcy. Accordingly, CMA’s interest in

resolving the issues of international comity raised by this

case extend beyond the effect of the decision below on the

creditors of Daewoo America. With questions of comity

li

becoming ever more common, particularly in the

international bankruptcy context, the ill effects of the

Eleventh Circuit’s analysis will be widely felt, including by

CMA’s members, the creditors it represents in this case, and

other creditors that it will represent in future cases.

CMA, its members, and the creditors it represents have a

strong interest in the outcome of this case because the

decision of the Eleventh Circuit expanded the doctrine of

international comity beyond all sensible limits. In doing so,

the Eleventh Circuit ignored both the limits on comity

established by other circuits and the guidance of this Court.

CMA’s amicus filing focuses primarily on matters not

addressed to any significant extent by petitioner. in

particular, the majority of the argument (all of Section II)

explains that the court of appeals’ erroneous decision to

apply “abuse of discretion” rather than de novo review to the

district court’s decision precluding petitioner’s fraud claims

results from a line of Eleventh Circuit decisions that have

inappropriately transformed international res judicata cases

into abstention cases. This Court’s review is needed to bring

the Eleventh Circuit’s jurisprudence into line with that of this

Court and other circuits.

CMA also argues that the Eleventh Circuit’s opinion

squarely conflicts with the Third Circuit’s decision in

Remington Rand Corp. v. Business Systems, Inc., 830 F.2d

1260, 1267 (3d Cir. 1987). Specifically, the Eleventh Circuit

(unlike the Third Circuit) applies the doctrine of comity to

preclude claims brought against entities other than the

foreign debtor that could not have been presented in the

foreign proceeding. The decision below is also inconsistent

with this Court’s decision in Marrese v. American Academy

of Orthopaedic Surgeons, 470 U.S. 373 (1985), because the

Eleventh Circuit precluded petitioner’s claims based on the

iil

plan approval order of a Korean reorganization court — which

has no jurisdiction to hear such claims — even though other

Korean courts would not have given it preclusive effect.

Furthermore, the Eleventh Circuit ignored this Court’s

guidance in Hilton v. Guyot, 159 U.S. 113, 164 (1895),

requiring that the rights of American citizens such as the

creditors represented by CMA be weighed against the overly

expansive application of foreign judgments.

In short, amicus has grave concerns about the

implications of the lower court decision, and a great interest

in securing expeditious review of the questions presented.

The motion for leave to file the attached brief should be

granted, and the Court should review and reverse the lower

court decision.

Respectfully submitted,

CHRISTOPHER J. WRIGHT *

TIMOTHY J. SIMEONE

STEPHANIE WEINER

HARRIS, WILTSHIRE &

GRANNIS LLP

1200 Eighteenth Street, N.W.

Washington, D.C. 20036

(202) 730-1300

* Counsel of Record

iV

QUESTIONS PRESENTED

1. Whether a district court’s dismissal of a lawsuit,

under the doctrine of international comity and based on the

preclusive effect of a foreign judgment, is reviewable de

novo or only for abuse of discretion.

2. Whether the doctrine of international comity may

be invoked, based on a prior order of a foreign bankruptcy

court approving a plan of reorganization for a foreign debtor,

to bar a lawsuit in U.S. courts, where the precluded claims

are asserted against parties other than the foreign debtor and

could not have been brought in the foreign proceeding.

¥

TABLE OF CONTENTS

AGED PAPEe BITE RES FS. FP WLI tasincciives cacecensrensviviondutepenpenss i

FRIES FINS FROIN E DD vicsscsssncssscnosesovssiniveoseneciesi hein IV

ROE RE PIER TE Uicilicbsinspusiniipsprinicéphtensaptalacavebicdoalagiitas 7

BPRRRaS GIF PAGS BETTIE E Coie ce sev csstuisecivesoncnsivnsstacvensncerevvubsiiag vii

INTERES? OF AMICUS CURIA. ..cccssccsssonccsnssossacsseorssisoeess l

PRELIMINARY STATEMENT | ccsecssssoccsissosecossvesessessostscesscs 2

SUMMARY OF THE ARGUMENT ............csccsccssorssssvosscoesee 4

REASONS FOR GRANTING THE PETITION ................06 5

I. THE ELEVENTH CIRCUIT’S INTERNATIONAL

COMITY RULING UNREASONABLY EXPANDS

SEALE SI BRUTE fib dagnienesricioereare neobnseatialiighumetiieis 5

A. The Decision Below Conflicts With Remington

Rand Because Respondents Were Not Debtors In

The Korean Reorganization Proceeding...................4 6

B. The Decision Below Is Contrary To Marrese

Because Korean Courts Would Not Bar

| at RNR AR eee OMEN ROPE TID ee Ed, 8

C. The Decision Below Failed To Adequately

Consider The Interests Of American Citizens........... 11

I]. PRINCIPLES OF RES JUDICATA RATHER THAN

ABSTENTION GOVERN THIS CASE AND

SP BPR Ee FOV Us ncisceticcesisetervcssversevedsones 12

vi

A. The District Court’s Comity Holding Involved

The Application Of Res Judicata Principles.............

B. De Novo Review Would Apply Here Even If The

Case Involved “Abstention”.................cccssersescesseeeee

CONCLUSION

SOOO EEE TEETH HERO EERE TEETH ETEHE EET EOE OH EEE HEHEHE EEE

Vii

TABLE OF AUTHORITIES

SUPREME COURT CASES Page

Burford v. Sun Oil Co., 319 U.S. 315 (1943) oo... 13,17

Colorado River Water Conservation District v. United

States, 424 U.S. 800 (1976).........:cccccesseceseeeereneees 13,14,17,18

Hilton v. Guyot, 159 U.S. 113 (1895) oo... cee eeeeeeeeeees 2,5,11

Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342

FRE |: ER Sere PL COMO OOO SON EN SE aoe 18

La. Power and Light Co. v. City of Thibodaux, 360 U.S.

eee te sch dinassareeiadinsgsecepobiniineiabatindaisdliestdehcnnadipiadiconinitidgiads 13

Marrese v. American Academy of Orthopaedic

Surgeons, 470 U.S. 373 (1985) .......cesscsesseesecerceseeeenes 4,8,9,10

R.R. Comm'n of Tex. v. Pullman Co., 312 U.S. 496

|) RR REARS eA ORIN MOREA RRO RTE SN INES 13

Steffel v. Thompson, 415 U.S. 452 (1974) .....ccecceeeeeesseeeeeees 14

Younger v. Harris, 401 U.S. 37 (1971) ......ccceeecsesessereeeeeeees 14

OTHER CASES

AAR Int'l, inc. v. Nimelias Enters. S.A., 250 F.3d 510

EE ets AT PiciiciiosieesiisibotsiShiesicanladidiacsibdcinseipbanpeciinionauiidbiedaacnecd 19

Al-Abood v. Elshamari, 217 F.3d 225(4th Cir. 2000).......... 20

Allstate Life Ins. Co. v. Linter Group, Ltd., 994 F.2d 996

MI rev ckicisccisitaihinadenicchcnacihetnedintadasinenisiesaubtunmnioodiosasabdeen 16

Bates v. Township of Van Buren, 459 F.3d 731 (6th Cir.

I ccciecsdoschcbsscdicadceuscabelaiecdenunsaianindeanateusapcelsudtsiiditecilbonduietladenats 15

Vili

Cunard §.S.Co. v. Saleen sataicll Servs., 773 F.2d 452

CO CE, FED oveceveptctninciniscsciectintbdicciamibiaeitemataabbdealaiad 16

Diorninou v. Mezitis, 237 F.3d 133 (2d Cir. 2001).............. 12

Finanz AG Zurich v. Banco Economico S.A., 192 F.3d

FAD CE CO SOD cctivstthsosictintidmipnisii ibis 15

First Penn-Pacific Life Ins. Co. v. William R. Evans,

Coon... FOR F.3d S45 COs Cat. DOGE) wvcsicecsissecstesssccnssrsadscssteses 17

Jota v. Texaco Inc., 157 F.3d 153 (2d Cir. 1998)............ 15,16

JP Morgan Chase Bank v. Altos Hornos De Mexico,

BAZ PSG SE C6 Ce, FO sstciciciciniuadatsbointaianiiens 7,12,15

Metro. Life v. Lockette, 155 F.3d 1339

CEG Civ: BGI srctcrciciusiaveitecoaicticiestesspemanmineniiadibsiiiacde 20

Nationwide Mut. Ins. Co. v. Unauthorized Practice of

Law Comm., 283 F.3d 659 (Sth Cir. 2002).........cceeseeseeeeee 19

Pravin Banker Assocs., Ltd. v. Banco Popular del Peru,

SOD F.3E DSO GG CO, TOT iviccsnsonststicssssivsctatiuctistigeasapieveneias 16

Remington Rand Corp. v. Business Systems, Inc., 830

PB ADR CEC, FI icidardictcictcicctnienni 4,7,8,10

Rio Grande Cmty. Health Ctr., Inc. v. Rullan, 397 F.3d

SL ee. | Mareen m nema, Lens iter hos FS BieteN 20

Smith v. Cent. Ariz. Water Conservation Dist., 418 F.3d

SOT CR Bee Rietthithcniectselienicieepuistesnntdipigiaiaapeiaaiaas 19

Superior Beverage Co. v. Schieffelin & Co., 448 F.3d

SED GI Ce, FO ivi seneccecsiinhtsahsicvssiiieead alaicsinartesen andes 17

Turner Entm't Co. v. Degeto Film GmbH, 25 F.3d 1512

CE Cy FD cociiscesinnisecndcctposaibasdsbiesetnebbdpsuiampemabgiaiie ted de 18

Ungaro-Benages v. Dresdner Bank AG, 379 F.3d 1227

CE RE, DI cece deciisiccvsnnwngshaninectnamiey Vealiguisidupianblipaas 11,16,18

ix

World Famous Drinking Emporium, Inc. v. City of

Tempe, 820 F.2d 1079 (9th Cir, 1987) ....cccccsssssssessesssseeeessen 14

SECONDARY SOURCES

de Coale, M. Trevino, Stay, Dismiss, Enjoin, or Abstain:

A Survey of Foreign Parallel Litigation in the Federal

Courts of the United States,

PCT Th Tail, Wal le WII R scciedhsarbbevienssenenhébutvokoienennegseubiennns 3,4

Maier, Harold G., Extraterritorial Jurisdiction ata

Crossroads: An Intersection Between Public and Private

International Law, 76 Am. J. Int'l L. 280 (1982) ...........eee 12

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INTEREST OF AMICUS CURIAE!

Credit Managers Association (“CMA”), which does

business as CMA Business Credit Services, is a California

nonprofit corporation providing business insolvency services.

CMA was founded in 1883 and has approximately 2,100

member companies representing a broad spectrum of

industries. Among the many services it provides, CMA is

frequently authorized by bankruptcy courts to serve as

secretary to the official creditors’ committee in

reorganization cases. In liquidation cases, CMA often

accepts a general assignment for the benefit of creditors from

the debtor.

In this case, CMA was appointed Trustee of the Creditor

Trust at the suggestion of petitioner and with the

endorsement of the Official Unsecured Creditor’s

Committee. CMA holds 95% of the stock of petitioner in

trust for, and for the benefit of, the thousands of holders of

unsecured claims in petitioner’s Chapter 11 proceeding.

More generally, as a_ result of the growing

internationalization of business, CMA, the creditors it

represents, and its member companies imcreasingly face

situations where issues arise concerning the effect of foreign

proceedings on a domestic bankruptcy or on U.S. creditors.

Accordingly, CMA has a strong interest in the outcome of

this case.

' No counsel for any party authored this brief in whole or in

part, and no person or entity, other than the named amicus

curiae and its counsel, contributed monetarily to the

preparation or submission of this brief.

2

PRELIMINARY STATEMENT

The petition for a writ of certiorari filed by Daewoo

Motor America, Inc. (“Daewoo America”) presents issues of

fundamental significance to American businesses. The

Eleventh Circuit expanded the doctrine of international

comity beyond sensible limits by barring hundreds of

millions of dollars of claims against respondents on the basis

of a Korean reorganization court’s order approving a plan of

reorganization for a debtor that is not a party to this litigation.

The Eleventh Circuit held that fraud claims asserted

against respondents are precluded by the Korean

reorganization court’s plan approval order even though

respondents were not debtors in the Korean proceeding and

even though Korean civil courts would not have barred

petitioner’s fraud claims on the basis of the Korean

reorganization court’s order. In reaching that result, the

Eleventh Circuit ignored both the limits on comity

established by other circuits and the guidance of this Court,

including the requirement that the rights of American citizens

such as the creditors represented by CMA be weighed against

the overly expansive application of foreign judgments. See

Hilton v, Guyot, 159 U.S. 113, 164 (1895) (requiring ““due

regard” for the “rights of [United States] citizens” in the

application of international comity). The Eleventh Circuit

also erroneously reviewed the district court’s decision under

the abuse of discretion standard when de novo review is

warranted.

At stake here are thousands of claims by the creditors of

Daewoo America, including those of hundreds of consumers

and small businesses. Daewoo America’s core claim is that,

while respondent General Motors Corporation (‘““GM”’’) was

negotiating to acquire the assets of Daewoo Motor Co., Ltd.

(“Daewoo Korea”), GM _ misled Daewoo America.

3

Specifically, Daewoo America alleges that GM repeatedly

assured Daewoo America that it would be included in the

GM acquisition and would continue to be the exclusive

distributor of Daewoo vehicles in the United States after the

acquisition. Daewoo America further alleges that, relying on

those assurances, it continued to invest in its distributor

operations and incur liabilities to dealers. Thereafter, GM

excluded Daewoo America from its agreement with the

Daewoo Korea Receiver. Daewoo America’s supply of

vehicles was terminated, its distribution business was ruined,

and it ultimately filed for bankruptcy relief under Chapter 11.

After Daewoo America’s bankruptcy filing, its creditors

filed claims for more than $840 million, and the value of the

allowed claims is approximately $519 million. The largest

group of allowed claims, for approximately $270 million, is

from former Daewoo dealers. Consumers filed nearly 3,000

allowed claims for approximately $21 million. Other

businesses both large and small filed hundreds more claims.

See Daewoo Motor America, Inc. Claims Analysis, Exhibit 7

to DMA’s . Sixth Amended Chapter 11 Plan of

Reorganization, dated July 24, 2003, Case No. LA 02-24411-

BB (Bankr. C.D. Cal.). As a result of the Eleventh Circuit’s

decision in this case, those claims have very little value.

Beyond the effect of the decision below on the creditors

of Daewoo America, issues involving international comity

are growing exponentially in importance. Of the more than

1,300 references to international comity in the federal and

state court decisions of this country, nearly half (over 600)

are from the last ten years. Indeed, it is widely reported that

issues relating to the preclusive effect of foreign judgments

arise “increasingly often today as a result of an

unprecedented expansion of transnational economic activities

and a resulting increase in international business disputes.”

M. Trevino de Coale, Stay, Dismiss, Enjoin, or Abstain: A

4

Survey of Foreign Parallel Litigation in the Federal Courts

of the United States, 17 B.U. Int’ L.J. 79, 80 (1999).

The Eleventh Circuit’s decision gives foreign judgments

greater preclusive effect than American judgments. That

would make no sense even if international comity issues

arose only infrequently. But with questions of comity

becoming ever more common, the ill effects of the Eleventh

Circuit’s analysis will be widely felt.

SUMMARY OF THE ARGUMENT

The decision below barred hundreds of millions of

dollars of claims against respondents by giving unwarranted

preclusive effect to the plan approval order of a Korean

reorganization court. The Eleventh Circuit’s erroneous

decision conflicts with decisions of this Court and other

courts of appeals.

I. The decision below expanded the doctrine of comity

to allow preclusion of claims that could not have been

presented in the foreign proceeding and are brought against

entities other than the foreign debtor. That approach flatly

conflicts with the Third Circuit’s decision in Remington

_ Rand Corp. v. Business Systems, Inc., 830 F.2d 1260, 1267

(3d Cir. 1987). In that case, the Third Circuit correctly held

that non-debtors in a foreign proceeding cannot use a foreign

judgment “as a shield” because that would not advance the

purposes of either bankruptcy law or the doctrine of comity.

The Eleventh Circuit’s decision is also inconsistent with

this Court’s decision in Marrese v. American Academy of

Orthopaedic Surgeons, 470 U.S. 373 (1985). The Court held

in Marrese that a federal court may not give preclusive effect

to a state court judgment where a state court would not do so,

and there is no good reason to give greater preclusive effect

to a foreign court judgment. Moreover, the foreign court

lacked jurisdiction over the claims the Eleventh Circuit has

5

held to be precluded, and its judgment should not be given

preclusive effect in that circumstance.

The Eleventh Circuit failed to follow the guidance of this

Court in Hilton v. Guyot, 159 U.S. at 164, which requires

“due regard” for the rights of United States citizens in the

application of international comity. Thousands of Daewoo

America creditors filed hundreds of millions of dollars in

claims for losses resulting from respondents’ wrongdoing.

As required by Hilton, the lower court should not have

extinguished those claims based on a foreign court judgment

without evaluating the equities — particularly where the

foreign court could not and did not adjudicate such claims.

I. This Court should also review the Eleventh Circuit’s

decision to apply the abuse of discretion standard. The court

below declined to review the district court’s decision de novo

because it concluded that this case involves abstention issues.

Pet. App. 10a. But it does not. The issue here is not whether

it makes sense to refrain from interfering with an ongoing

proceeding elsewhere, but whether to give preclusive effect

to a judgment already issued. That makes this a res judicata

case rather than an abstention case — and de novo review is —

warranted in res judicata cases. The court of appeals’

erroneous decision follows from a line of Eleventh Circuit

decisions that have inappropriately transformed international

res judicata cases into abstention cases. This Court’s review

is needed to bring the Eleventh Circuit’s jurisprudence into

line with that of this Court and other circuits.

REASONS FOR GRANTING THE PETITION

I. THE ELEVENTH CIRCUIT’S INTERNATIONAL

COMITY RULING UNREASONABLY EXPANDS

THAT DOCTRINE.

The Eleventh Circuit barred claims against entities other

than the debtor in the Korean reorganization proceeding. It

6

did so even though a Korean court would not bar those

claims, and without adequately considering the interests of

American citizens. Its decision is contrary to decisions of

this Court and courts of appeals.

A. The Decision Below Conflicts With Remington

Rand Because Respondents Were Not Debtors In

The Korean Reorganization Proceeding.

Daewoo America seeks damages from respondents for

misrepresenting that Daewoo America would continue to be

the exclusive American distributor for Daewoo vehicles after

GM’s acquisition of Daewoo Korea. Petitioner argued below

that comity should not bar this claim. because it does “not

involve the same cause Qf action and the same parties” as the

foreign reorganization proceeding. Pet’r C.A. Br. at 51.

Daewoo America added that “not even a Korean civil court

would preclude DMA from suing the Defendants.” Pet’r

C.A. Reply Br. at 14 (citation omitted). Moreover, petitioner

explained that it would be inconsistent with the purposes of

both bankruptcy law and the doctrine of comity to allow a

foreign judgment to be “used as a shield by the non-debtor

Appellees.” Jd. at 12.

The Eleventh Circuit did not meet these arguments head

on. It did not dispute that petitioner's fraud claim against

non-debtor parties was not presented to and could not have

been adjudicated by the Korean court. Nor did it conclude

that respondents were debtors in the Korean reorganization

proceedings. Rather, the court invented an unprecedented

legal impediment to petitioner’s claims. Specifically, the

Eleventh Circuit held that comity bars petitioner’s claims

because they are “intertwined with the order of the Korean

7

court” and “arise out of the same nucleus of operative facts

considered by the Korean court.” Pet. App. 16a.

The lower court thus held that it does not matter that

petitioner’s claims were not (and could not have been) heard

by the Korean court or that respondents were not debtors in

that action. This new approach to questions of comity

represents a dangerous split from sounder precedents in other

circuits and from this Court’s jurisprudence.

In Remington Rand, the Third Circuit held that non-

debtors in a foreign insolvency proceeding could not use the

foreign judgment “as a shield.” The court explained that the

rationale for precluding claims against a foreign debtor — “to

allow a foreign debtor’s assets to be distributed equitably,”

830 F.2d at 1267 — is simply inapplicable to entities other

than the foreign debtor. See also JP Morgan Chase Bank v.

Altos Hornos De Mexico, 412 F.3d 418, 424 (2d Cir. 2005)

(American courts defer to foreign bankruptcy proceedings

because “the equitable and orderly distribution of a debtor’s

property requires assembling all claims against the limited

assets in a single proceeding”) (citation. omitted). The

decision below conflicts with that decision, and the Third

Circuit’s approach is the sounder one.

? Respondents Suzuki Motor Corporation and American

Suzuki Motor Corporation (“Suzuki Respondents’)

creatively interpret this section of the Eleventh Circuit’s

opinion as holding that petitioner could (and should) have

presented all of its claims to the Korean bankruptcy court.

See, e.g., Resp. Br. at 24-25. But the Eleventh Circuit said

no such thing, and the Korean court would not have had

jurisdiction to consider petitioner’s tort claims. See below at

pp. 9-10.

8

The Suzuki Respondents (see Resp. Br. at 19-21) seek to

harmonize the decision below with Remington Rand by

emphasizing the Eleventh Circuit’s view (see Pet. App. 16a,

17a) that petitioner’s request for injunctive relief on some |

claims would have required that the “‘transfer [of assets

under the MTA and Modified Reorganization Plan approved

by the Korean court] be set aside.’”” As Judge Tjoflat pointed

out, however, petitioner also sought damages on thirteen of

its fourteen claims. Pet. App. 27a n.8. Judge Tjoflat

accordingly understood that “[fjor the vast majority of

Daewoo America’s claims, the proceedings before the

Korean bankruptcy court serve as little more than a factual

backdrop.” /d. at 19a. Plainly, a monetary award against

GM would not have any effect on the “orderly distribution”

of the Daewoo Korea assets addressed by the Korean court.

And equally plainly, even if it were proper to allow the

Korean judgment to bar any claims that would have

interfered with the Korean court’s decision, it makes no sense

to allow that decision to be invoked against claims for

damages that would have no such effect.

In short, in contrast to Remington Rand, the rule adopted

by the Eleventh Circuit allows non-debtor third parties to rely

on foreign judgments to bar claims that do not undercut a

foreign bankruptcy decision. That unwarranted expansion of

international comity severely prejudices the nights of the

creditors that CMA represents here and others it will

represent in future transnational bankruptcy proceedings.

B. The Decision Below Is Contrary To Marrese

Because Korean Courts Would Not’ Bar

Petitioner’s Claim.

The Eleventh Circuit’s view that it does not matter

whether Daewoo America’s claims were presented to the

Korean Court so long as they relate to the “operative facts” at

9

issue there is inconsistent with this Court’s decision in

Marrese. This Court held that a federal court may not give

preclusive effect to a state court judgment where a state court

would not do so. The Court pointed out that claim preclusion

obviously should not apply when a plaintiff could not have

“rel{ied] on a certain theory of the case or . . . [sought] a

certain remedy because of the limitations on the subject

matter jurisdiction of the courts.”” 470 U.S. at 382. The

Court concluded that under the relevant federal statute, 28

USC. § 1738,> a federal court may not “give greater

preclusive effect to a state court judgment than would the

judgment-rendering state.” Jd. at 384.

The same principle should apply here: A Korean court’s

decision plainly should not be given more preclusive effect

by a federal court than the decision of the court of a state

within our federal system.* Yet that is precisely what

happened below — the Eleventh Circuit precluded claims that

the Korean civil courts would have allowed to go forward.

In the lower courts, Daewoo America presented a declaration

from a Korean legal expert explaining that Korean

reorganization courts do not have jurisdiction over general

civil claims or claims against the debtor arising after the

* Section 1738 provides that “judicial proceedings ... shall

have the same full faith and credit in every court within the

United States and its Territories and Possessions as they have

by law or usage in the courts of such State, Territory or

Possession from which they are taken.”

* Under the Treaty of Friendship, Commerce and Navigation

Between the United States of America and The Republic of

Korea, ‘“‘a Korean judgment is elevated to the status of a sister

state judgment.” Pet. App. ISa.

10

commencement of bankruptcy proceedings. See Exhibit | to

Pet’r 11" Cir. Br. at 916. The Korean reorganization court

therefore “made no ruling” with respect to Daewoo

America’s claims against respondents. /d., 420. As a result,

“not even a Korean civil court would preclude DMA

[Daewoo America] from suing the Defendants based on

doctrines of comity, res judicata, or collateral estoppel.” Jd.

GM’s expert below did not refute this opinion. He did

not claim that the Korean reorganization court had

jurisdiction to adjudicate petitioner’s fraud claims, or that it

would have done so. Rather, in his affidavit GM’s expert

indicated only that Daewoo America’s tort claims are

“properly heard, if at all, in a Korean Court.” Sang-Hyun

Song 11th Cir. Aff. 9 14. In fact, however, under Marrese, if

the Korean courts would not preclude Daewoo America’s

claims — and they would not — then those claims should be

allowed to proceed in United States district court as well.

The Suzuki Respondents argue that there is no conflict

with Marrese here because petitioner purportedly “could

have brought its claims in the Korean [reorganization]

proceeding.” Resp. Br. 27. However, the Eleventh Circuit

did not say that — instead it held, contrary to the Third

Circuit’s decision in Remington Rand, that even a non-debtor

third party may invoke a foreign judgment to preclude any

claim arising from the same “operative facts” as the foreign

judgment. The Eleventh Circuit found a commonality of

“operative facts” sufficient to give the Korean reorganization

court’s plan approval order preclusive effect with respect to

Daewoo America’s claims against GM regardless of whether

that court had jurisdiction over the claims and regardless of

whether a Korean civil court would have accorded that

judgment such claims preclusive effect — matters as to which

the Eleventh Circuit made no findings. That rule conflicts ©

not only with Remington Rand, but with Marrese as well.

11

C. The Decision Below Failed To Adequately

Consider The Interests Of American Citizens.

The Eleventh Circuit recited the long-established rule that

a court applying the doctrine of international comity should

consider “the rights of its own citizens.” Hilton v. Guyot,

159 U.S. at 164; see Pet. App. 13a. But the court failed to

observe the rule. Instead, the Eleventh Circuit held only that

“Daewoo America has not identified any ‘public policy

notion[] of what is decent and just’ that is offended by the

application of comity to the Korean bankruptcy order.” Pet.

App. 15a. The Eleventh Circuit thereby effectively

substituted its own vague public policy inquiry, see, e.g.,

Ungaro-Benages v. Dresdner Bank AG, 379 F.3d 1227, 1238

(11th Cir. 2006), for the weighing of citizens’ rights required

by the Hilton case.

In fact, the rights of American citizens affected by the

lower court’s comity decision are substantial. The thousands

of Daewoo America creditors who filed claims in this

proceeding have an enormous stake in the outcome here.

Those creditors, including hundreds of consumers and small

businesses, have filed half a billion dollars in claims. Yet the

courts below failed even to mention their interests of in

performing the comity analysis.

The severe prejudice to those creditors of expanding the

doctrine of comity to block their claims is obvious. As

alleged by Daewoo America, respondent’s

misrepresentations caused it and its dealers to continue to

invest large sums in the expectation of a continuing U.S.

-distributorship — money that was lost when GM reneged on

its representations. In contrast, the only possible

consequence of allowing petitioner’s claims to go forward is

that respondents might be called upon to redress the harm

that they caused. These claims by one non-debtor in the

12

Korean re’ nization proceeding against other non-debtors

in that p ° eding are of no concern to the Korean

reorganization court. As required by Hilton, the lower court

should have at least evaluated these equities.

The doctrine of international comity “has never been

well-defined, leading one scholar to pronounce it ‘an

amorphous never-never land whose borders are marked by

fuzzy lines of politics, courtesy, and good faith.” JP

Morgan Chase Bank, 412 F.3d at 423 (quoting Harold G.

Maier, Extraterritorial Jurisdiction at a Crossroads: An

Intersection Between Public and Private International Law,

76 Am. J. Int'l L. 280, 281 (1982)). This Court’s guidance is

sorely needed to correct the Eleventh Circuit’s expansion of

the doctrine, which unreasonably harms American citizens.

I]. PRINCIPLES OF RES JUDICATA RATHER THAN

ABSTENTION GOVERN THIS CASE AND

DICTATE DE NOVO REVIEW.

The Eleventh Circuit incorrectly held that “the principle

of international comity applied in this case is an abstention

doctrine” subject to “abuse of discretion” review. Pet. App.

10a. That decision is inconsistent with the Second Circuit’s

decision in Diorninou v. Mezitis, 237 F.3d 133 (2d Cir.

2001), and also is manifestly incorrect. First, principles of

res judicata, not abstention, govern this case and dictate de

novo review. Second, even if abstention analysis were

applicable here, de novo review would apply to the district

court’s decision because it rests on a legal determination.

This Court should grant certiorari to ensure that applications

of international comity respect that fundamental rule.

A. The District Court’s Comity Holding Involved The

Application Of Res Judicata Principles.

The district court invoked international comity to

determine the preclusive effect of an order already entered by

13

the Korean reorganization tribunal, not to avoid interfering

with ongoing foreign proceedings. The decision was thus

akin to a determination of res judicata rather than to

abstention.

A brief review of this Court’s abstention jurisprudence

underscores the difference. Abstention is a narrow exception

to the “virtually unflagging obligation of the federal courts to

exercise the jurisdiction given them.” Colorado River Water

Conservation District v. United States, 424 U.S. 800, 817

(1976). This Court’s precedents establish five widely

recognized forms of abstention. None of them resembles the

action taken by the district court in this case.

The first three variations on abstention permit a federal

court to stay its hand when important questions of unclear

state law would be better resolved by concurrent or future

state proceedings. First, Pullman abstention allows a federal

court to abstain when a state court’s clarification of uncertain

state law in a pendant claim would permit the federal court to

avoid a constitutional question. See R.R. Comm'n of Tex. v.

Pullman Co., 312 U.S. 496, 501 (1941). Second, in diversity

cases, a federal court may exercise Thibodaux abstention

where an important issue of state law intimately involved

with the State’s sovereign prerogatives remains unclear. La.

Power and Light Co. v. City of Thibodaux, 360 U.S. 25, 30-

31 (1959). Third, Burford abstention allows a federal court

to abstain where state law is unclear and there is a need to

defer to complex state administrative procedures. Burford v.

Sun Oil Co., 319 U.S. 315, 333-34 (1943). In all of these

circumstances, however, once the state tribunal has resolved

the state-law issue or issues, there is no further basis for

abstention. In other words, the justification for abstention

resides in the availability of a forthcoming state court

clarification of state law.

14

The fourth form of abstention — Younger abstention —

differs from the previous three in that it requires (rather than

permits) federal courts to abstain from interfering in ongoing

state enforcement proceedings through the issuance of an

injunction or declaratory relief.” See Younger v. Harris, 401

U.S. 37 (1971) (abstaining from enjoining pending criminal

proceeding). Once again, however, the justification for

abstention is the ongoing state action. See Steffel v.

Thompson, 415 U.S. 452, 462 (1974) (The “principles of

equity, comity, and federalism” that compel Younger

abstention lack “force in the absence of a pending state

proceeding.”’) (citation omitted).

Fifth, and finally, the Court articulated a narrow basis for

abstention in Colorado River, under which a federal court

may sometimes abstain because of duplicative litigation in

state court. More specifically, in rare cases the interests of

“wise judicial administration” and a “comprehensive

disposition of the litigation” may outweigh the duty to_

exercise jurisdiction. /d. at 817 (citation omitted). Again,

however, the basis for Colorado River abstention lies in the

existence of ongoing duplicative proceedings in state court.

As this brief review shows, abstention is fundamentally a

forward-looking concept. Central to the doctrine is the

principle that concurrent state proceedings may, in the future,

best resolve certain issues properly before a federal court.

> Because the district court “must dismiss the federal action”

when “a case falls within the proscription of Younger,” there

is broad agreement among the courts of appeals that Younger

abstention determinations are reviewed de novo. See, e.g.,

World Famous Drinking Emporium, Inc. v. City of Tempe,

820 F.2d 1079, 1081-82 (9th Cir. 1987).

15

And deciding whether a future state determination would, in

fact, resolve issues in a manner preferable to federal court

adjudication of those issues necessarily calls for the exercise

of judgment or discretion on the part of the district court.

Such an exercise of judgment is, of course, appropriately

reviewed under an abuse of discretion standard.

In contrast, where a state court judgment has already been

entered, the concerns of abstention must give way to the

backward-looking principles of res judicata. Stated most

simply, res judicata comprises rules precluding a court from

hearing a matter that another court has already resolved.

Because the question what has been resolved is a legal one,

district court decisions applying res judicata principles

should be reviewed de novo. See, e.g., Bates v. Township of

Van Buren, 459 F.3d 731, 734 (6th Cir. 2006).

This same distinction between the forward-looking,

discretionary exercise required in abstention cases and the

backward-looking, legal one involved in res judicata

situations exists in the context of international comity

determinations. Where concurrent foreign proceedings are

ongoing, a federal district court may be called upon to make

a discretionary determination regarding which suit may best

resolve specific issues.° But where a foreign tribunal has

° Indeed, as cited by the Suzuki Respondents, see Resp. Br. at

14 & n.9, appellate courts have reviewed comity decisions

involving pending foreign bankruptcy proceedings for abuse

of discretion. See, e.g., JP Morgan Chase Bank, 412 F.3d at

422 (reviewing lower court’s decision to apply comity in

light of a “pending foreign bankruptcy proceeding”); Finanz

AG Zurich v. Banco Economico §.A., 192 F.3d 240, 242 (2d.

Cir. 1999) (reviewing extension of comity to on-going

Brazilian liquidation proceedings); Jota v. Texaco Inc., 157

16

already entered judgment, the U.S. court must primarily

determine — through the application of res judicata principles

~— which matters have been “judged” so as to preclude

relitigation. That is a legal question that should be subject to

de novo review.

This case plainly involves the latter kind of

determination. The district court was called upon to

determine as a matter of law whether the Korean court would

even have had jurisdiction to decide the issues presented by

Daewoo America in federal court. If the Korean court could

not have ruled on those issues even had they been raised

before it, then its decision should not be given preclusive

effect. Because that was a legal question to be decided under

F.3d 153, 159 (2d Cir. 1998) (reviewing extension of comity

to pending proceedings in Ecuador); Pravin Banker Assocs.,

Ltd. v. Banco Popular del Peru, 109 F.3d 850, 856 (2d Cir.

1997) (reviewing denial on grounds of comity of motion to

stay U.S. proceedings in deference to pending foreign

proceedings); Allstate Life Ins. Co. v. Linter Group, Ltd., 994

F.2d 996, 999 (2d Cir. 1993) (reviewing extension of comity

to pending Australian liquidation proceedings); Cunard

S.S.Co. v. Saleen Reefer Servs., 773 F.2d 452, 460 (2d Cir.

1985) (reviewing decision to grant comity to pending

Swedish bankruptcy proceedings).

’ In previous cases, the Eleventh Circuit has referred to the

backward-looking analysis as “retrospective comity” rather

than preclusion or res judicata. See Ungaro-Benages, 379

F.3d at 1238-39. But changing the name does not affect the

legal nature of the determination made, and should not affect

the standard of review.

17

res judicata principles, the court of appeals erred by

declining to review the district court’s decision de novo.

B. De Novo Review Would Apply Here Even If The

Case Involved “Abstention.”

As discussed above, the Eleventh Circuit’s determination

that this case involves “an abstention doctrine” is simply

incorrect. It bears emphasis, however, that even were this

properly viewed as an abstention case, the Eleventh Circuit’s

decision to review the trial court’s ruling only for abuse of

discretion would still be both wrong and inconsistent with the

decisions of other circuits in the only abstention cases —

Colorado River cases — even arguably analogous here.

As set forth above, Pullman, Burford, Thibodaux, and

Younger abstention all relate “to considerations of proper

constitutional adjudication and regard for federal-state

relations.” Colorado River, 424 U.S. at 817. The abuse of

discretion standard is appropriate for review of such

determinations.* This case does not involve constitutional

adjudication or federalism. However, Colorado River

abstention involves “considerations of ‘[wise] judicial

administration, giving regard to conservation of judicial

* The only case cited by the court below on the question of

standard of review involved Burford abstention. See Boyes v.

Shell Oil Prods. Co., 199 F.3d 1260 (11th Cir. 2000). In the

majority of the circuits, lower court applications of Burford

abstention are, indeed, subject to review for abuse of

discretion. See, e.g., First Penn-Pacific Life Ins. Co. v.

William R. Evans, Chid., 304 F.3d 345, 348 (4th Cir. 2002).

But see Superior Beverage Co. v. Schieffelin & Co., 448 F.3d

910, 913 (6th Cir. 2006) (reviewing de novo).

18

resources and comprehensive disposition of litigation.’” Jd.

(quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co.,

342 U.S. 180, 183 (1952)).

While this case is not an abstention case at all, the

Eleventh Circuit presumably believed that it implicates

“considerations of wise judicial administration” and

“conservation of judicial res_urces.” Indeed, the Eleventh

Circuit has previously relied on Colorado River abstention

principles in addressing the question whether to follow a

foreign judgment. See Turner Entm't Co. v. Degeto Film

GmbH, 25 F.3d 1512, 1518 (11th Cir. 1994). In Turner, the

court found it “helpful” to “take[] the criteria enunciated in

Colorado River and appl[y] them to the international

context.” Jd. Subsequently, in Ungaro-Benages, 379 F.3d at

1237, the Eleventh Circuit cited this aspect of 7urner for the

proposition that “[i]nternational comity . . . is an abstention

doctrine.”” The decision below in turn cited Ungaro-Benages

for that same proposition. Pet. App. 10a.

Leaving aside the question whether it makes any sense to

consider this an abstention case merely because Colorado

River principles may be “helpful” to the analysis, the

Eleventh Circuit’s decision below fails to recognize that

conflating this case with Colorado River abstention should

be the beginning of the standard of review analysis, not the

end. That initial determination only begs the question what

standard of review applies in Colorado River cases.

Appellate decisions on that subject are neither unanimous

nor clear, but most circuits apply de novo review to some or

all aspects of the Colorado River analysis. The Seventh

Circuit, for example, has explained that “[iJn evaluating the

propriety of the district court’s decision to abstain under

Colorado River, {the reviewing court] must first determine

whether the . . . proceedings are parallel .... This is a legal

19

issue which we review de novo.” AAR Int'l Inc. v. Nimelias

Enters. S.A., 250 F.3d 510, 518 (7th Cir. 2001).

Furthermore, a number of the circuit courts do not limit

de novo review in Colorado River cases to the “parallel

proceedings” inquiry. The Ninth Circuit, for example, has

stated that “[w]hether the facts of a particular case conform

to the requirements for a Colorado River stay or dismissal is

[also] a question of law which we review de novo.” Smith v.

Cent. Ariz. Water Conservation Dist., 418 F.3d 1028, 1032

(9th Cir. 2005). The Fifth Circuit applies this basic

approach not only to Colorado River review but to all

abstention cases, reviewing “de novo whether the

requirements of a particular abstention doctrine are satisfied.”

Nationwide Mut. Ins. Co. v. Unauthorized Practice of Law

Comm., 283 F.3d 650, 652 (Sth Cir. 2002).

The basic principle running through these decisions is the

traditional rule that district court exercises of discretion — as

in predicting whether a state court would be better situated to

address a specific issue of state law — are reviewed for abuse

of discretion. But district court determinations of law — such

as whether another court has already decided an issue or

whether the requirements of a particular abstention doctrine

are satisfied — are reviewed de novo. In this case, the

question whether the Korean court even had jurisdiction to

decide the issues presented is plainly a matter of law,

regardless of whether res judicata or abstention analysis

applies.

Against this backdrop, the reason why the Eleventh

Circuit got the standard of review wrong here turns out to be

far larger than just this case: The Eleventh Circuit does not

apply the simple principles set forth above either in Colorado

River cases or in international comity cases. Rather, the

court categorically reviews abstention decisions for abuse of

20

discretion without considering the nature of the specific

district court determination at issue. Specifically, the

Eleventh Circuit holds to the unnuanced view that “[t]he

standard for reviewing a district court’s exercise of Colorado

River abstention . . . is abuse of discretion.” See, e.g., Metro.

Life v. Lockette, 155 F.3d 1339, 1341 n.2 (11th Cir. 1998);

see also Rio Grande Cmty. Health Ctr., Inc. v. Rullan, 397

F.3d 56 (1st Cir. 2005), and Al-Abood v. Elshamari, 217 F.3d

225 (4th Cir. 2000) (both circuits apparently sharing the

Eleventh Circuit’s categorical approach to Colorado River

review). And in the case of the present international comity

determination, the Eleventh Circuit found simply that

“international comity .. . is an abstention doctrine” and “a

district court’s decision to abstain will be reversed only upon

a showing of abuse of discretion.” Pet. App. 10a.

In sum, although this case presents no issue of abstention,

the Eleventh Circuit’s abstention cases explain why that court

failed to apply the proper standard of review. The reason is

disturbingly systemic: Rather than looking at the nature of

the district court determination challenged on appeal to

determine the proper standard of review, the Eleventh Circuit

relies — both here and in abstention cases — on wooden

categorization. This Court should take this case to correct

that systemic problem in the Eleventh Circuit and other

courts taking a similar approach.

CONCLUSION

The petition for writ of certiorari should be granted.

21

Respectfully submitted,

CHRISTOPHER J. WRIGHT *

TIMOTHY J. SIMEONE

STEPHANIE WEINER

HARRIS, WILTSHIRE &

GRANNIS LLP

1200 Eighteenth Street, N.W.

Washington, D.C. 20036

(202) 730 1300

* Counsel of Record

March 7, 2007