yes, but that would not be an issue here.
I said thank you and left. It is important
to note that this attorney comes from a
purportedly prominent local law firm.
We ultimately retained Angel Candida,
who is a well-established attorney in
San Luis Potosí with a stellar reputation, to assist with the appeal.
I have encountered lawyers who will
tell you that they can handle anything
and are reluctant to bring in other counsel. I was impressed when José Antonio
suggested that we also retain one of his
colleagues, Luis Asali Harfuch, who
has extensive appellate experience and
is well respected by the appellate court
judges throughout Mexico.
The case was tried before the Juzgado
Cuarto Del Estado de San Luis Potosí
(The Fourth Court of the State of San
Luis Potosí.) There were two opportunities to appeal. First, before the Tribunal
Unitario del Noveno Ciruito (The first
Unitarian Court of the Ninth Circuit),
where only the magistrate judge decides
the appeal. The final appeal took place
before the Segundo Tribunal Colegiado
del Noveno Ciruito (the Collegial Court
of the Ninth Circuit also known as the
Constitutional Court), where three
magistrate judges decide the appeal.
We expected that the first appel-
late court would affirm the adverse
decision of the lower court. Only one
judge was deciding our fate and we
were not certain if this judge would
be fair and impartial. To our surprise,
the court ruled that the penal-
ties provided for in the simulated
contract violated Mexican law. The
judgment was modified, awarding the
plaintiff only US$100,000 in damages
plus US$40,000 on prior invoices
that were owed. The court did not
rule on the validity of the simulated
contracts. This was unexpected. We
would have been happy to pay that
amount but the plaintiff appealed.
Therefore, we also appealed.
The constitutional court remanded the
matter to the first appellate court with
instructions to rule on the validity of
the contract. The constitutional court
did not instruct the lower court as
to how to rule but to simply make a
determination based on the evidence
presented. At first, the lower court
did not modify the opinion and sent
it back to the constitutional court
without any changes. We learned later
that no changes were made because the
magistrate did not have time to work
on the file so he sent it back without
changes. The constitutional court
remanded the matter again.
The lower court ruled that the
contracts were in fact simulated and
fraudulent, thereby declaring them
to be invalid and the factory owed no
money. The amended decision was then
sent back to the constitutional court,
which later affirmed the lower appel-
late court’s decision. Not only did the
plaintiff not get any money under the
contract, but because it lost the matter,
it was obligated to pay 20 percent of
US$17 million or US$3.4 million.
At the end of the day, justice prevailed
in Mexico, but not without a lot of hard
work, worrying, and luck. We were lucky
to find good lawyers who were meticulous, persistent, and tenacious. No stone
was left unturned. Notwithstanding,
all of this could had been avoided if a
robust system of checks and balances
would have been in place. Powers of
attorney should not be so broad. They
should be reviewed every year by management and local counsel. Attending
the significant court hearings gave me
the opportunity to evaluate the performance of Mexican counsel. Outside
counsel always seem to be at their best
when working in front of the client.
This is why US management should not
be just a passive observer but rather be
actively involved in the matter. ACC
1 A simulated contract is an agreement
that seems to be valid and bona fide
but is actually invalid. In civil law
jurisdictions, it is a contract that does
not express the true intent of the parties.
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Crisis Management Strategies for the In-house
Counsel in High-profile and Class-action
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for In-House Counsel (Jan./Feb. 2016).
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