In case of parallel litigation where parties' contract contained clause designating Australian court as proper forum, Federal Court of Australia rules that, where defending U.S. party's challenge to its jurisdiction is still pending, Australian party's request for notices for U.S. party to produce documents is premature
Smurfit Stone Container Corporation (Plaintiff), headquartered in Chicago, IL, installed technology proprietary to Armacel Pty. Ltd. of Australia (Defendant) at its corrugated cardbord plant in Pennsylvania. It appears, however, that the technology did not perform as expected and caused regulatory compliance problems.
In October 2007, Plaintiff brought a civil action against Defendant in a Pennsylvania federal court asking for a declaratory judgment as to the rights of the parties under their contract. Defendant moved the U.S. court to dismiss the Pennsylvania action, contending that the contract's forum selection clause (FSC) specified New South Wales as the proper forum for resolving their contract disputes. The following month, Defendant sued Plaintiff in the Federal Court of Australia, New South Wales District.
On December 27, 2007, the U.S. Court denied the motion. It reasoned that, when parties merely "consent" to litigate in a particular forum, they do not rule out the jurisdiction of other fora. On the other hand, an FSC that clearly and unequivocally designates one forum, however, will generally preclude jurisdiction elsewhere.
Here, the U.S. Court finds that the FSC at issue does not absolutely require litigation to take place only in New South Wales. The Court, therefore, denies Respondent's motion to dismiss and declines to stay its proceedings while the parties are litigating in Australia.
Meanwhile, in New South Wales, Defendant obtained leave to serve Plaintiff outside the jurisdiction (namely in the U.S.), to obtain document production. Plaintiff moved to set aside two notices to produce, dated November 15 and 26 of 2007. To this end, Plaintiff entered a limited appearance to challenge the Australian Court's jurisdiction over the dispute. Alternatively, Plaintiff asked the Court to rule that it does not have to answer the notices. It also has a motion pending to set aside the original order allowing service outside the jurisdiction.
The Australian Court decides that the U.S. Plaintiff is not required to turn over documents based on a notice to produce (compare subpoena duces tecum, a notice to appear with specified documents, in U.S. law) where its own jurisdiction is up in the air. "[A]n applicant proceeds upon the basis that it need only establish the existence of a prima facie case at the stage in the proceeding where the procedures of the court, including discovery, have not been invoked." [Slip op. 1]
"[A] respondent seeking to challenge the jurisdiction of the court should not have imposed upon it one of the Court's compulsory processes in aid of establishing the jurisdiction. I do not consider that, at this stage of the proceedings in which the jurisdiction is under challenge, the applicant can invoke the compulsory process of the Court. The rules of the Federal Court provide that a notice to produce has the force and effect of a subpoena. Accordingly, the issue of a notice to produce must be considered as [a premature] attempt to invoke the Court's compulsory processes" [Slip op. 2]
Citation: Armacel Pty Limited v. Smurfit Stone Container Corporation [2007] F. C. A. 1928 (December 6, 2007) [Australian proceeding]. See also Smurfit Stone Container Corp. v. Armacel Proprietary Ltd., 2007 WL 4571116, No. 4:07 CV 1822 (M. D. Pa. 2007).
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