Cross-Border Legal Disputes Stuck in No-Man’s Land : Business: Workers in Mexico are suing a U.S. company over layoffs on grounds that it controlled the Mexican firm that employed them. They are asking for three months’ severance pay--following Mexican law. The case is only the tip of the iceberg.

Say company A is located in Mexico and all of its workers are Mexican. However, it has only one customer, company B, an American firm that collects all its revenues and pays all its expenses.

Are they separate companies or one and the same?

Should they follow Mexican law or American law?

And if one sues the other, should the lawsuit be heard by an American or a Mexican judge?

These questions are at the heart of a lawsuit filed by 100 Mexican women against a California company.

And legal experts say this type of cross-border dispute will only become more common as the United States and Mexico grow ever more economically linked.

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“We’re starting to be presented with legal issues in a cross-border context that we haven’t dealt with before,” said San Antonio lawyer Wayne Fagan.

Examples abound:

* Emissions spewed from a coal-generating plant in the Mexican state of Coahuila prompt complaints from Texas.

* California residents who invested in condominiums in Baja California contend the developers went out of business and bolted with their money.

* A Mexico resident refuses to pay child support to his offspring in the United States.

“The combinations and permutations are endless,” said Richard Page, a San Diego lawyer who has litigated some of them. “And it arises from the fact that we live on a border.”

The suit by 100 former employees of the Exportadora de Mano de Obra plant in Tijuana, which shut down in November, is one of the more graphic examples of the messiness of sorting out blame when plaintiffs, defendants, laws and judges don’t all come from the same country.

The women, whose job was to inspect rubber-like O-rings that go into cars, planes and electronics, are suing Downey, Calif.-based National O-Ring for $300,000 in back pay.

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Under Mexican labor law, which is stricter than U.S. law to account for the fickleness of some foreign maquiladora owners, companies that go out of business must compensate their workers.

These companies are liable for three months’ pay, plus vacation and Christmas bonuses.

The crux of the women’s dispute is simple: Who should pay that $300,000--Exportadora or National?

The women contend National is responsible because it controlled Exportadora.

National disagrees, saying the now-defunct Exportadora was a separate entity.

Faced with a U.S. company that had Mexican ties but will not submit to a Mexican court, the women’s lawyer has turned to a Los Angeles court, asking it to enforce Mexican labor law.

Those experienced in cross-border cases say the women’s chances of getting a U.S. judge to hear the claim are slim.

But more important, the suit and others like it could be a stumbling block to booming North American trade.

The year-old North American Free Trade Agreement contains side agreements to solve disputes between the governments of the United States, Mexico and Canada over national policies that might hinder trade.

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But the pact did not establish any mechanism for resolving the myriad “micro” conflicts between people and companies from different countries.

When Exportadora was incorporated in Mexico in 1989, two owners of National held 90% of its stock.

Edgardo Sandoval, a Mexican citizen and National employee who was chosen to supervise Exportadora’s workers, was given 2%. At the time, Mexican law required that maquiladoras have some Mexican ownership.

By all accounts, Exportadora and National got along well the next four years.

Then last Nov. 11, National, which had been looking at sites for a bigger plant in Tijuana, began scaling back O-ring shipments to Exportadora until it no longer had work for the women.

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Before Exportadora petered out, National was calling the shots, the women’s attorney, Fred Kumetz, contends.

It decided how many people to hire, set work schedules, handled expenses and salaries, and took in all revenues.

National letterhead identified Exportadora as “our subsidiary company.”

National then made elaborate requests for copies of payroll checks and petty cash slips, and required detailed reporting on hiring and promoting.

“When you reach that point, you don’t have two separate companies; you have one,” Kumetz said.

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For that reason, he contends, it’s appropriate for an American court to decide the claim because it has jurisdiction over National, whose liability is at issue.

National doesn’t dispute that it took over Exportadora’s expenses and revenues.

However, it insists Exportadora was a separate entity.

“Even though we are their only client, those people do not work for National O-Ring,” said spokesman Dan Melendez.

National’s lawyers contend that “California’s connection to this lawsuit is, at best, extremely tenuous and remote.”

They argue that Mexican law, and only Mexican law, applies here.

The National case may take years to resolve.

Because of that, lawyers say that parties in cross-border disputes often are better served through arbitration or other less expensive, less rancorous, alternatives.

However, until such alternatives take root, no one expects the level of disputes to slow down.

Moreover, as long as trade throughout North American continues to grow, then so will the acrimony, they say.