A divided El Paso appellate court ruling has ended, for now, a lawsuit alleging former participants in a soured land deal had manipulated the Mexican criminal justice system to have a businessman thrown in a Juarez prison and subsequently to extort a $2.1 million payment from him.
The 2-1 ruling from the Eighth Court of Appeals, issued Wednesday in the dispute between Juan Alvarez Gottwald and Rosa Delgado Dominguez De Cano and three other members of the Delgado family, clarifies that it’s the trial judge’s discretion to determine whether Texas or Mexico law applies to determine res judiciata, or whether the dispute has already been settled and cannot be relitigated. The majority held that the litigation of a related suit in Juarez, Mexico, barred this one from proceeding in El Paso under Texas law.
Lead appellate lawyer for the Delgados, Chad Baruch of Johnston Tobey Baruch, told The Texas Lawbook that while some of the holdings are fact-specific, the opinion could have broader implications.
“When you have a foreign judgment, the American judge has the discretion to apply the forum state’s res judicata law,” he explained. “The bottom line takeaway is, it is possible for a foreign country’s judgment to have greater preclusive effect in Texas than it would have in the country that entered the judgment.”
Alvarez had argued Texas courts had no choice but to apply Mexican res judicata law to the Mexican judgment and that under that standard his suit here was not barred.
Here’s the relevant timeline:
- July 2008 — Alvarez’s company, Axiom, and the Delgados ink three contracts under which Axiom will purchase undeveloped property in Juarez for $1 million and will pay an additional $2.1 million if the sellers secured permits for water and sewage services within a designated time.
- 2011 — After the Delgados secure the permits, a dispute arises after Axiom fails to pay the $2.1 million bonus, and the family files criminal charges against Axiom in a Mexican magistrate court.
- August 2013 — Alvarez, who was 72 at the time, is arrested after a warrant is issued and spends 11 days in Juarez’s Cereso Prison. He is released after agreeing to pay the Delgados $2.1 million in exchange for them dropping the criminal charges.
- November 2013 — Alvarez files suit in El Paso County District Court, seeking return of the $2.1 million and other damages stemming from alleged abuse of process and intentional infliction of emotional distress.
- August 2014 — Axiom files an “illegitimate enrichment” lawsuit in Juarez against the Delgados seeking return of the $2.1 million.
- February 2016 — The El Paso trial court dismissed that suit after finding Texas was the incorrect forum for the dispute.
- January 2019 — The Eighth Court of Appeals reverses that decision and remands the case back to El Paso County District Court, holding there was no evidence an alternate forum was available to all parties.
- October 2022 — The Delgados argue the Mexican court’s dismissal of the Juarez suit mandates dismissal of the El Paso suit, too.
- 2023 — After seeing the Juarez case dismissed by the trial court in Mexico, a ruling affirmed in two different appeals, the country’s Amparo court also denies relief.
- March 2023 — The El Paso court has a bench trial on res judicata issue.
- August 2023 — The El Paso court grants the motion to dismiss on res judicata grounds.
- October 2023 — Alvarez files notice of appeal with the El Paso court.
In briefing on appeal, Alvarez argued that in the Juarez suit, his company, Axiom, “had neither reason, nor standing, to bring claims pertaining to Alvarez’s personal injuries sustained as a result of his 11-day incarceration in a hellhole of a Mexican prison.” And Alvarez argued he had no personal standing to make a claim for recovery of the $2.1 million, which was paid by Axiom.
Justice Lisa J. Soto authored a 10-page dissenting opinion hitting on that point. She explained she would not have affirmed dismissal on res judicata grounds because in her opinion the record establishes Alvarez was not “in privity” with Axiom in the Mexican suit. Privity exists when one party controls an action — like the filing of a lawsuit — even if they are not party to it, or when one party’s interests are represented by another party in litigation.
“But the crucial question is whether, in the Mexican suit, Axiom (or Alvarez on its behalf) represented or could have represented Alvarez’s non-overlapping individual interest, i.e., those reflected in his claims for intentional infliction of emotional distress and abuse of process, as well as conspiracy to commit the same,” Justice Soto wrote. “The Delgados point to no evidence that Axiom or Alvarez as its director represented or could have represented such interests in the Mexican suit. Nor does the majority.”
The majority found that a stipulation made at trial established privity between Alavarez and Axiom and that the overlapping interests of the two parties, namely that both sought the return of $2.1 million in the Mexican and Texas lawsuits, also showed privity.
“Alvarez’s imprisonment served as the catalyst for the filing of the Mexican suit, which again, by his own testimony, was initiated at his direction (Alvarez: ‘[T]hey did sue at my direction, yes.’),” the majority wrote in the 26-page opinion. “To secure his release from prison, Alvarez — acting through the powers of his representative capacity — paid $2,189,000 from Axiom’s account to secure his personal release. Realizing he would not otherwise be released, Alvarez decided, and was able, to pay the large, disputed amount by cashier’s check drawn on Axiom’s account.”
“This conduct demonstrates Alvarez’s control and unfettered access to substantial corporate funds as sole director and without accountability to a board, and for the sole benefit of his individual release. The record establishes that Alvarez is the sole director, answers to no board, exercised control sufficient to pay over $2 million from Axiom’s account for his personal release and to advance his individual interests, and initiated the Mexican lawsuit.”
El Paso lawyer Stephen G. Peters, who represents Alvarez, did not immediately respond to a message seeking comment Thursday.
The Delgados are also represented by Randy Johnston of Johnston Tobey Baruch and Carlos Eduardo Cardenas of El Paso.
The case number is 08-23-00274-CV.