types a transcript of the testimony, which
is signed by the witness and all attorneys.
Defense counsel cannot be present during the testimony of his client. Opposing
counsel as well as members of the public
can be present. Attorneys for both parties
can be present during the testimony of
non-party witnesses. The submission of
written questions is not required for non-party witnesses.
There is typically no courtroom.
The evidence is presented in a
cramped room before the attorney
law clerk. There is a secretary who
types the witness testimony and, once
signed, places it in the file. There was
one chair for the witness. All other
parties must stand.
Once the evidentiary phase has concluded, the attorneys have three days to
file written closing arguments that become part of the record. The magistrate
will then review the court file and make
a decision based upon the evidence
contained in the file. Many US lawyers
are perplexed by the fact that the court,
with few exceptions, does not hear the
evidence. Mexican judges believe that,
for some reason documentary evidence
prepared under oath is more reliable
than eyewitness testimony.
Failed attempt at mediation
After the first hearing, José Antonio and
I asked to meet with the plaintiff and his
attorney. Two of his associates were also
present. The experience was surreal. At
the beginning, each party expresses its
gratitude to the other for graciously at-
tending the meeting. The lead attorney
refused to provide a settlement amount.
I made an offer of US$100,000. His only
statement was “We are still far apart.”
Without company authority, I offered
US$500,000. He again said, “We are still
far apart.” The plaintiff seemed anxious
to settle but the lead attorney gave him
a stare, which obviously meant, “Do not
say a word.” I politely said thank you
and we left.
It is difficult to mediate cases in
Mexico. In the United States, the
pretrial discovery makes the process
more transparent because each side is
required to disclose most of the evidence
(but not all) to be presented. Each side
knows the other’s strengths and weaknesses. Mexican law does not provide
for discovery. Mexican lawyers are often
reluctant to begin a settlement negotiation. No one wants to be the first. It is
considered a sign of weakness — that
the lawyer does not have confidence in
his case — otherwise, why settle? I received demand letters on other matters
in Mexico. A number of the Mexican
lawyers advised me not to respond. If
the plaintiff is serious about his case, he
will file a lawsuit. This is diametrically
opposed to the view in the United States
where it is usually prudent to respond to
a demand letter.
We knew that winning this case was
an uphill battle. A broad power of
attorney is usually the kiss of death.
In most cases, the only remedy is to
sue the employee or press criminal
charges. Notwithstanding, all evidence
that would prove that the contract is a
simulated contact would be submitted.
In an effort to prove there was collu-
sion between the former plant man-
ager and the vendor, we introduced
testimony from multiple witnesses
showing that no one else at the factory
knew about the contract until the law-
suit was filed. José Antonio submitted
testimony from witnesses explaining
that auto parts manufacture can only
predict the level of future services six
months in advance at the most. The
services needed are totally contingent
on the orders received by the factory.
The truth, veracity, and credibility of
the plant manager was also attacked.
Management terminated the plant
manager because of his illegal activities
that put the factory in jeopardy.
The attorney law clerk for the court
hinted during a conversation that
an adverse ruling was probable. She
stated after the close of the evidence
that we will have all of the remedies
available under Mexican law. I then
notified management of the probable
loss. It was no surprise when the court
issued a judgment against the factory
for US$17 million. In San Luis Potosí,
the costs are taxed at 20 percent of
the amount of the demand. In other
parts of Mexico, costs are taxed at eight
percent. The judgment also included
cost, which is 20 percent of the US$17
million. The loser usually pays cost.
Advising upper management of the
verdict was a difficult call to make
despite the fact that management re-
ceived reports after each hearing.
Because José Antonio is based in
Mexico City we decided to seek local
counsel who could assist with the ap-
peal. One local lawyer suggested that
we not appeal. His advice was to create
other entities and transfer the factory
assets to those entitles to avoid paying
the judgment. Knowing the answer to
the question, I asked if Mexico law pro-
hibited fraudulent transfers. He said,
Beware of powers of attorney in Mexico
1. Only give the employee that authority that is necessary to carry out his
2. Place a dollar limit on purchases.
3. Require secondary approvals.
4. Revoke the power of attorney when the employee is terminated.
5. Do a yearly audit of who has authority to act on behalf of the company
and the extent of that authority.
50 ASSOCIATION OF CORPORATE COUNSEL
WINNING THE UNWINNABLE CASE