The United States is a prime "consumer" nation but it also is a "seller" of many types of goods, high tech and otherwise. Given the march of goods and services into and out of this country, proliferation of contracts between domestic and foreign entities, existence of legal doctrines protecting against fraud, breaches of contract and injury to consumers, and an abundance of lawyers, an increase in lawsuits here by and between foreign parties is inevitable. The United States, because of its sophisticated, nuanced and fair litigation system, is a natural magnet for lawsuits by foreign business interests or injured individuals. Foreign plaintiffs likely will get a fair shake in American courts. The amount of a recovery by judgment or settlement, plus its collectability, are likely enhanced. Thus, litigation-"hungry" foreign plaintiffs find it attractive to sue here. Similarly, foreign defendants may be hauled into U.S. courts by foreign plaintiffs based on purported minimal "contacts" with this country. Actually, it is somewhat amazing to contemplate that other-side-of-the-world boundaries virtually can be eclipsed by the simple, ministerial act of filing a lawsuit, at nominal cost, in a U.S. state or federal court. And, if jurisdiction holds, that cheap filing expense is a passport or visa which permits searching, probing discovery to be conducted against the defendant, extracting confidential disclosures not likely to be revealed in a foreign forum. While the U.S. court system seems generous in hosting lawsuits filed by foreign plaintiffs at nominal cost, U.S. taxpayers likely do not want to underwrite the expense of funding courts that resolve disputes properly heard elsewhere. One of the checks against American courts becoming clogged by foreign plaintiffs is the common-law doctrine of forum non conveniens. Under this doctrine, a federal court "may decline to exercise its jurisdiction, even though the court has jurisdiction and venue, when it appears that the convenience of the parties and the court and the interests of justice indicate that the action should be tried in another forum."[1] The practical effect is to require the plaintiff to refile his complaint in a more convenient forum somewhere else. Analogous considerations apply in most state courts. In New York, for example, Civil Practice Law and Rules (CPLR) 327 provides that a court has discretion to stay or dismiss an action if, after weighing relevant factors, it determines that substantial justice requires the suit to be heard in a different forum. The essential elements of a forum non conveniens dismissal have been relatively stable since the U.S. Supreme Court's decision in Piper Aircraft Co. v. Reyno,[2] in 1981. However, weeks ago, the doctrine was again put on the front burner by the U.S. Supreme Court's decision March 5 in Sinochem International Co. Ltd. v. Malaysia International Shipping Corp.[3] Interestingly, both Piper Aircraft and Sinochem involved petitions for certiorari from decisions by the U.S. Court of Appeals for the Third Circuit. Sinochem's issue, which had divided circuit courts, was whether a district court must first conclusively establish its own jurisdiction before dismissing a suit on the grounds of forum non conveniens. Immediate Ruling In Sinochem the unanimous Court, in an opinion by Justice Ruth Bader Ginsburg, held: "[A] district court has discretion to respond at once to a defendant's forum non conveniens plea, and need not take up first any other threshold objection. In particular, a court need not resolve whether it has authority to adjudicate the cause (subject-matter jurisdiction) or personal jurisdiction over the defendant if it determines that, in any event, a foreign tribunal is plainly the more suitable arbiter of the merits of the case."[4] In other words, where it is clear that a foreign tribunal is a more suitable forum to resolve the case merits, the district court has discretion to rule immediately. It needn't first resolve difficult issues of subject matter and personal jurisdiction. This is quite important because the threshold jurisdictional issues can themselves be expensive and time-consuming to resolve, perhaps even requiring protracted discovery proceedings or jurisdictional fact hearings. A forum non conveniens motion can be a shortcut to an expeditious, relatively prompt dismissal. As always, however, the result is not automatic. The circumstances have to be right, the advocacy on the motion has to be on-target and the usual factors the courts must balance have to be identified. Below, as a refresher, we will review some of the essential principles from Piper Aircraft but, first, a bit more on Sinochem. Sinochem was a Chinese state-owned importer who contracted with a domestic corporation (not a party here) to purchase steel coils. The latter subchartered a vessel owned by Malaysia International, a Malaysian company, to transport the coils. Payment would be made under a letter of credit by producing a valid bill of lading certifying that the coils had been loaded for shipment by a certain date. A bill of lading was presented triggering a payment under the letter of credit. However, Sinochem, alleging the bill of lading was falsely backdated, petitioned a Chinese admiralty court to preserve a maritime claim against Malaysia International. The Chinese court ordered the ship arrested and Sinochem duly filed a complaint in that tribunal. Malaysia International then filed suit in a U.S. district court alleging misrepresentations made by Sinochem in its Chinese petition and seeking compensation for losses due to arrest of the vessel. Sinochem moved to dismiss on several grounds including lack of subject matter and personal jurisdiction and forum non conveniens. The district court held it had subject matter jurisdiction, concluded it lacked personal jurisdiction over Sinochem under Pennsylvania law, conjectured that limited discovery might reveal that it did have personal jurisdiction, but nevertheless dismissed on forum non conveniens grounds. It found that the case could be adjudicated adequately and more conveniently in Chinese courts. The Third Circuit reversed. Although the appellate court agreed that there was subject matter jurisdiction and that the personal jurisdiction issue could not be resolved without discovery, the panel held that the district court could not dismiss for forum non conveniens unless and until it determined definitively that it had both subject matter and personal jurisdiction. The U.S. Supreme Court, however, disagreed. This was a "textbook case for immediate forum non conveniens dismissal."[5] Here there was no "genuine risk that the more convenient forum will not take up the case. Proceedings to resolve the parties' dispute are under way in China with Sinochem as the plaintiff."[6] Open Question? The Court did leave open one significant question. Because of prior case law suggesting that there must be an available alternative forum, courts often condition a dismissal on the defendant's waiver of jurisdictional or statute of limitations challenges to litigation in the foreign tribunal. These conditions can be imposed when the district court has subject matter and personal jurisdiction. However, if a court can now bypass these threshold issues and dismiss the suit on forum non conveniens grounds, then what becomes of the conditions of waiver? In Sinochem, because a Chinese tribunal had already entertained and ruled on the jurisdictional issue, the Court held it "need not decide" whether a court conditioning a forum non conveniens dismissal on the waiver of jurisdictional or limitations defenses "must first determine its own authority to adjudicate the case."[7] Apart from the potential for a form of "instant gratification" in a relatively speedy motion to dismiss, the flexible balancing test courts are to perform remains mostly intact from 1981 when Piper Aircraft[8] was decided. There the Court clarified that in forum non conveniens inquiries, the fact that American law is more favorable to the claimants than the law of a foreign forum is of limited significance. That circumstance is simply not an influencing factor although it can possibly become one of many relevant considerations if the remedy provided by the alternative forum is so clearly inadequate or unsatisfactory "that it is no remedy at all." The key focus of the forum non conveniens inquiry is "convenience." Thus a dismissal will be appropriate where trial in the plaintiff's chosen forum imposes a heavy burden upon the defendant or the court, and where the plaintiff is unable to offer any specific reasons of convenience supporting his choice. The convenience inquiry involves the trial court's consideration of all relevant public and private interest factors, a balancing task which, if performed reasonably, is said to be within the discretion of the trial court. The Supreme Court's opinion in Piper Aircraft followed by some 35 years the Court's prior key decision in this area, Gulf Oil Corp. v. Gilbert,[9] in which the Court had adopted a flexible balancing test, sometimes referred to as a "Gilbert analysis." The original balancing test survived the Piper decision with little change except that the factor of a less favorable foreign forum or law clearly was minimized. The Piper controversy arose from an air crash in Scotland in which the pilot and five passengers, all Scottish subjects, died. The aircraft was manufactured by defendant P in Pennsylvania. The propellers were made by defendant H in Ohio. The craft was registered in Great Britain, and was owned, maintained and operated by British entities. The plane's wreckage was located in England and British boards of inquiry conducted investigations and hearings. A review board found no evidence of defective equipment but indicated that pilot error may have been the cause of the crash. A year later a California probate court appointed an administratrix of the estates of the five Scottish passengers. She also happened to be the legal secretary of the attorney who filed the lawsuits for wrongful death a few days after her appointment. In the meantime, representatives of the passengers also sued the owner, operator and pilot's estate in the United Kingdom. The actions filed in the California state court were removed to federal court and then venue was transferred to a federal court in Pennsylvania. Defendants P and H moved to dismiss the actions on the grounds of forum non conveniens. These motions were granted. Balancing Factors To guide a trial court's exercise of discretion, the Supreme Court in Gilbert had articulated a list of "private interest factors," affecting the convenience of the litigants, and a list of "public interest factors" which affected the convenience of the forum. Gilbert's "private interest" factors included relative ease of access to sources of proof, availability of compulsory process, cost of attendance of witnesses, view of the premises and "all other practical problems that make trial of a case easy, expeditious and inexpensive." Gilbert's "public interest" factors included administrative difficulties caused by court congestion, local interest in having localized controversies heard at home, the applicability of familiar law in the forum, avoidance of unnecessary conflicts of law or application of foreign law and the burden of jury duty by citizens in an unrelated forum. The Pennsylvania federal court in Piper performed the Gilbert analysis and concluded that both the private and public interest factors pointed to convenience in the Scottish forum. First, an alternative forum existed in Scotland. Second, plaintiff's choice of forum was entitled to little weight. While a plaintiff's choice ordinarily deserves substantial deference, here the real parties in interest were foreign citizens seeking an American forum because of more liberal products liability law. When the plaintiff is not an American citizen or resident the deference to be paid to plaintiff's choice is slight. Third, the "private interest" factors showed that the connection of the litigation with Scotland was "overwhelming." Factors included the citizenship of the real parties in interest, the location of the witnesses on such issues as the aircraft's maintenance, investigation of the crash, damages, Scottish topography and access to the wreckage. Indeed, because crucial witnesses and evidence were beyond the reach of compulsory process and impleader by P and H of Scottish defendants could not be effected, it simply was "unfair" to make P and H defend in Pennsylvania. Furthermore, since the real parties in interest had sued other defendants in Scotland, it would be more fair and less costly to litigate the entire case abroad. A fourth aspect of the district court's rationale was the relevant public interest criteria. Under choice of law principles Pennsylvania law would apply to P and Scottish law to H. The court was unfamiliar with Scottish law and would have to rely on experts from that country. As a result, trial would be "hopelessly complex and confusing for a jury." The trial would also be enormously costly and time-consuming and, therefore, it was unfair to burden Pennsylvania citizens with jury duty upon a controversy with which the U.S. District Court for the Middle District of Pennsylvania had little connection and in which there was little interest in the outcome. In short, all "convenience" roads led to Scotland and the fact that Scottish law was less favorable was insignificant. The Third Circuit reversed, however, and held in effect that dismissal should be barred if it would lead to a change in applicable law that was unfavorable to the plaintiff. It was this overemphasis upon the unfavorable character of foreign law that triggered reversal by the Supreme Court in Piper. Because American courts are already attractive to foreign plaintiffs, the Third Circuit's approach would make them even more desirable. The litigation flow into the United States would thereby increase and further congest already crowded courts. Conclusion The central focus of the inquiry, therefore, is not whether the foreign law is less favorable but "convenience." The district court's balancing approach was deemed a reasonable exercise of its discretion. The Court in Piper also made clear the distinction between forum non conveniens and transfers of venue between federal courts. The former is a rule of dismissal based on "convenience" while the latter is a "federal housekeeping measure" allowing easy change of venue within a unified federal system. Further, the notion that a plaintiff's choice of forum is entitled to great deference does not hold true when the plaintiff is foreign. Moreover, a less favorable alternative forum may become a serious factor only when the remedy provided abroad is "so clearly inadequate or unsatisfactory that it is no remedy at all." This means that such less favorable aspects of foreign law and procedure as unavailability of strict products liability, lesser damage recoveries and absence of jury trials will not prevent forum non conveniens dismissals. A dismissal based on "convenience" does not depend upon the higher standard of "unfairness" to the defendant; a dismissal is supportable by the arguably lesser "burdensome" standard. Thus, for example, it may not have been "unfair" to defendants P and H that they could not implead Scottish third-party defendants but it was certainly a "burdensome" factor. Since it would be far more "convenient" to resolve all claims in one trial, "burdensomeness" was deemed a most relevant factor for the trial court to consider in its balancing exercise. Sinochem allows a trial court to speed up this balancing process and consider a dismissal at the threshold. Michael Hoenig is a member of Herzfeld & Rubin. Endnote: _________________________________________________________________________________________ [1.] 469 F3d 675, 2006 U.S. App. LEXIS 29292 (7th Cir. Nov. 29, 2006). [1.] Piper Aircraft Co. v. Reyno, 454 US 235, 250 (1981). [2.] Id. [3.] 2007 U.S. LEXIS 2828 (March 5, 2007). [4.] Sinochem, Id., LEXIS at *9. [5.] Id., LEXIS at *26. [6.] Id., LEXIS at *26. [7.] Id., LEXIS at *26. [8.] Supra, n.1. [9.] 330 US 501 (1947). |
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