O’Melveny Team Prevails for Mexican Salt Mining Company in Multi-Billion Dollar Contract Dispute

Ninth Circuit Affirms Prior Win for Exportadora de Sal, S.A. de C.V.

FOR IMMEDIATE RELEASE

LOS ANGELES—August 15, 2018—O’Melveny secured another major victory today on behalf of Mexican salt mining company, Exportadora de Sal, S.A. de C.V. (ESSA), in the Ninth Circuit Court of Appeals. ESSA, a majority-owned subsidiary of the Mexican government, is one of the world’s largest producers of salt.

The plaintiff, Packsys, S.A. de C.V. (Packsys), a Mexican manufacturing corporation, alleged that ESSA breached a multi-billion dollar contract to sell residual brine, a lucrative byproduct of ESSA’s salt production. ESSA’s former General Director executed this contract. Packsys’ core argument was that ESSA was bound to the contract because its General Director had entered into the contract on its behalf.

Today’s ruling upheld an earlier dismissal by a Los Angeles federal district court, which concluded that ESSA was a “foreign state” under the Foreign Sovereign Immunities Act (FSIA) and, therefore, immune from jurisdiction. The federal district court agreed with O’Melveny’s argument that ESSA was immune without exception because ESSA’s former General Director had acted without authority because he failed to obtain authorization from ESSA’s Board of Directors, as required by Mexican law.

In the opinion filed today, posted here, the Ninth Circuit agreed with the federal district court’s dismissal and adopted O’Melveny’s argument. The Ninth Circuit wrote, “Mexican law required ESSA’s board to authorize or approve the Packsys contract, but the board did not do so.” Instead, ESSA’s then-General Director, Jorge Lopez Portillo Basave (Portillo), presented the Board with a proposal it did not approve. “Therefore, Portillo lacked actual authority to execute the contract. And because the contract was not executed with actual authority, it cannot serve as the basis for applying either the FSIA’s commercial activity exception or its waiver exception…. The district court correctly concluded that the FSIA bars this suit.”

O'Melveny was assisted in Mexico by Fernando Perez-Correa from the law firm of Solórzano, Carvajal, González y Pérez Correa, S.C. (Solcargo).

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