Question

E&L Consulting, Ltd., is a U.S. corporation that sells lumber products in New Jersey, New York, and Pennsylvania. Doman Industries, Ltd., is a Canadian corporation that also sells lumber products, including green hem-fir, a durable product used for home building. Doman supplies more than 95 percent of the green hem-fir for sale in the northeastern United States. In 1990, Doman contracted to sell green hem-fir through E&L, which received monthly payments plus commissions. In 1998, Sherwood Lumber Corp., a New York firm and an E&L competitor, approached E&L about a merger. The negotiations were unsuccessful. According to E&L, Sherwood and Doman then conspired to monopolize the green hem-fir market in the United States. When Doman terminated its contract with E&L, the latter filed a suit in a federal district court against Doman, alleging violations of U.S. antitrust law. Doman filed for bankruptcy in a Canadian court and asked the U.S. court to dismiss E&L’s suit, in part, under the principle of comity. What is the “principle of comity”? On what basis would it apply in this case? What would be the likely result? Discuss.

Answer 1

Comity is, in the words of the court, “the recognition which one nation allows within its territory to the legislative, executive, or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens, or of other persons who are under the protection of its laws.” Comity is accorded to the act of a foreign court if it is a court of competent jurisdiction and “the laws and public policy of the forum state and the rights of its residents will not be violated.” With respect to bankruptcy proceedings, “American courts have consistently recognized the interest of foreign courts in liquidating or winding up the affairs of their own domestic business entities.” These principles “certainly [hold] true for Canada, a sister common law jurisdiction with procedures akin to our own. ... Canada’s bankruptcy procedure ... satisfies the standards of procedural fairness.” Thus “extending comity to the Canadian proceeding does not frustrate an important public policy of the United States.” The court ultimately resolved the case on another ground, however, holding that “plaintiffs’ antitrust allegations are insufficient to state a claim as a matter of law.”