U.S. Court Rules for Panamanian Corporation

(Washington, D.C.) - On August 24, 1999, the U.S. Armed Service Board of Contract Appeals, in a panel decision by three judges, issued the first-ever decision by a U.S. court condemning the U.S. military for unlawful actions taken against foreign commercial interests during the time leading up to “Operation Just Cause,” the 1989 U.S. invasion of Panama.

The case against the Army Air Force Exchange Service (AAFES), acting on behalf of the U.S. Army and U.S. Air Force, arose from the unlawful termination in 1989 of the contracts the U.S. military had with a Panamanian corporation, Home Entertainment, Inc., and the unlawful expropriation of Home Entertainment’s entire inventory, property and business records. Home Entertainment had operated video rental concessions on most of the U.S. military bases in Panama until the U.S. military in September 1989 summarily terminated the contracts it had with the company, seized the company’s entire inventory, and began operating the business itself through AAFES.

The owners of Home Entertainment, Mr. Gabriel Mendez and Mr. Santiago Porcell, have been waiting 10 years for a resolution of this claim. The case finally went to trial in December 1998. Commenting from Panama City, Panama, Mr. Mendez noted that “it is ironic that we have finally been vindicated almost 10 years to the day after our business was stolen from us. My objective throughout this case has been to clear our name - to prove that we did nothing wrong to deserve the horrible treatment we received. My lawyers did a fantastic job.” Scott Heimberg, Andrea Vavonese and Michael Kaye, from the Washington, D.C., office of Akin, Gump, Strauss, Hauer & Feld, L.L.P., represented Home Entertainment.

The three judges rejected the U.S. government’s claims that its actions were protected as “sovereign acts” and similarly rejected the defense that the contracts were properly terminated for cause. In addition, the judges ruled that the actions of AAFES in forcing the owners of Home Entertainment to accept a token offer that amounted to a fraction of the value of their business “were coercive.” “This case is one of the few successful civil actions pursued against the U.S. military for its unlawful actions taken during the period surrounding ’Operation Just Cause’ in Panama,” commented Mr. Heimberg, who headed the Akin Gump team. As a result of the decision, Home Entertainment will recover substantial monetary damages for the unlawful breach of contract.

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