The Rise of Cannabis Litigation Against Foreign Entities – Where Will You Litigate?

As the cannabis industry continues to evolve, an increasing need arises relating to litigation between domestic parties and international parties. By the simple fact that a dispute involves a foreign party, a host of special considerations come into play – one of which is, where will this be litigated? Often, in an attempt to have the home court advantage, we are confronted with the situation that both sides have initiated lawsuits in their respective courts. Unfortunately, where the parties ultimately end up litigating is not a simple matter of who got to their courthouse first. In this article, we’ll provide an introduction to two principles that may come into play: international abstention and forum non conveniens.

International abstention

Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976), provides that a United States court may abstain from exercising its jurisdiction over a case based on “considerations of wise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation.” A pretty nebulous standard, right? Luckily, the Colorado River Court also provides a list of factors that a court should consider in deciding whether to close its door on a particular case:

  • Whether either court has assumed jurisdiction over a res (property);
  • The relative convenience of the forums (i.e., where do the anticipated witnesses reside and/or are they beyond the Court’s subpoena power?);
  • The desirability of avoiding piecemeal litigation;
  • The order in which the forums obtained jurisdiction (i.e., has “more litigation” occurred in either action?);
  • What law controls;
  • Where the final relief needs to be enforced; and
  • Whether the foreign proceeding is adequate to protect the parties’ rights.

Abstaining from the exercise of jurisdiction is the exception, not the rule. So, unless the above factors weigh much more heavily in favor of litigating in a foreign court, a federal court in the United States should agree to allow the case.

Forum non conveniens

Similar to international abstention, dismissal of a case on the grounds of forum non conveniens is a matter of Court discretion. The party that wishes to move the litigation has the burden of establishing (1) that an adequate alternative forum exists, and (2) that the balance of private and public interest factors favors dismissal in the current jurisdiction.

Most other countries have already been classified as “adequate” alternative forums or not, so that’s pretty straightforward. The balance of private and public interest factors is more fact-dependent, and early motion practice involving forum non conveniens typically requires hashing them out:

Private interest factors:

  • The relative ease of access to sources of evidence/proof
  • The cost of obtaining attendance of willing witnesses
  • All other practical problems that make trial of a case easy, expeditious, and inexpensive

Public interest factors:

  • The administrative difficulties flowing from court congestion
  • The local interest in having localized controversies resolved at home
  • The interest in having the trial of a diversity case in a forum that is familiar with the law that must govern the action
  • The avoidance of unnecessary problems in conflicts of law
  • The unfairness of burdening citizens in an unrelated forum with jury duty

Generally, dismissal is proper when, in light of these factors, the party requesting dismissal has made a showing that either: (1) establishes oppression against it that is out of proportion to the other party’s convenience (which is usually slight or nonexistent), or (2) makes trial in the current forum inappropriate because of considerations affecting the court’s own administrative and legal problems.

Given the intensely fact-dependent nature of both these principles, it’s important to note that if there is a clause in your agreement or contract that specifically outlines where any dispute will be litigated (a “forum selection clause”), it will be considered presumptively valid and it will be generally enforced “absent a showing that enforcement would be ‘unreasonable under the circumstances.’” Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). Smart contracting in the first instance can help you avoid going through early motion practice involving the arguments discussed above!

Jihee Ahn — Harris Bricken