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JURISDICTION
In action to enforce judgment of Quebec court, First Circuit reverses summary judgment for lower court’s failure to resolve genuine issues of fact as to extent of party’s business activities in Quebec
According to the complaint, Kitchen International, Inc. (Defendant) and Evans Cabinet Corp. (Plaintiff) entered into a contract in 2004. Plaintiff agreed to supply Defendant with manufactured cabinetry for several residential building sites on the U.S. East Coast. Defendant placed these orders from its Montreal headquarters with the Plaintiff’s Georgia offices.
Defendant also claims that the two parties agreed in 2004 that they would set up a products showroom at Defendant’s office in Montreal. According to Defendant, Plaintiff manufactured and shipped cabinetry and related products plus sales and promotional materials to Quebec for use in the showroom later that year. Plaintiff denies the existence of such an agreement.
At some point, various issues came up as to the quality and conformity of the products that Plaintiff had shipped to the East Coast projects. As a result, in May 2006, Defendant hired a Canadian attorney to sue Plaintiff in the Superior Court of Quebec for breach of contract Plaintiff was duly served with process. Plaintiff, however, failed to answer or otherwise respond to the suit. On May 31, 2007, the Superior Court of Quebec entered a default judgment against Plaintiff in the amount of $149,354.74.
On April 23, 2007, Plaintiff filed this diversity action for breach of contract and quantum meruit in the Massachusetts federal court. Defendant moved to dismiss on the ground that res judicata barred the action. Plaintiff opposed the motion contending that the Superior Court of Quebec had lacked jurisdiction over it. On November 4, 2008, the district court gave summary judgment to Defendant.
The court first determined that, because it was sitting in diversity, it should apply the Massachusetts’s version of the Uniform Foreign Money‑Judgments Recognition Act (UFMJRA or the Act) to determine whether it should enforce the Quebec judgment. In order to enforce a judgment under the Act, the court reasoned, the Quebec court must have had the power to exercise personal jurisdiction over Plaintiff.
The court first noted that Massachusetts courts had interpreted its long‑arm statute as an assertion of personal jurisdiction to the limits allowed by the U.S. Constitution. The district court then ruled that the Quebec Superior Court’s exercise of personal jurisdiction over Plaintiff did not contravene traditional notions of fair play and substantial justice since the Plaintiff had had several meaningful contacts with Quebec.
As a result, the court employed Quebec rules of res judicata to determine whether it should give the default judgment preclusive effect. The court then concluded that Canadian law would bar Plaintiff’s suit. The district court, therefore, held that res judicata precluded the present action and entered summary judgment for Defendant. Plaintiff duly noted an appeal. The U.S. Court of Appeals for the First Circuit reverses.
The Court then set forth its rationale. “Defendant’s motion to dismiss the Massachusetts action did not attempt simply to bar the prosecution of the current action in Massachusetts on the ground that the district court lacked authority to adjudicate Plaintiff’s present contract claim there. Rather, it was a motion addressed to the merits of the Massachusetts action.”
“It sought a ruling that Plaintiff was precluded from obtaining the substantive relief that it sought in the Massachusetts action because an earlier judgment obtained in another court precluded any further litigation of the matter. As part of that assertion, Defendant submits that the earlier judgment was rendered by a court that had personal jurisdiction over the defendant in that action, i.e. Plaintiff. Plaintiff takes the opposite view. This is a merits dispute properly analyzed at this stage of the proceedings by conventional summary judgment analysis.” [140].
“When sitting in diversity and asked to recognize and enforce a foreign country judgment, federal courts tend to apply the law of recognition and enforcement of the state in which they sit, as required by Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938). However, some courts and commentators have suggested that recognition and enforcement of foreign country judgments deserves application of a uniform federal body of law because suits of this nature necessarily implicate the foreign relations of the United States. This question has not been decided definitively in this circuit.”
“We shall follow the same course in this case because we need not resolve the matter here. Neither party has suggested that the district court ought to have followed a rule other than that of Massachusetts. In any event, even if the reciprocity rule of Hilton v. Guyot, 159 U.S. 113 (1895) were applicable under the facts of this case, the Massachusetts rule of recognition and enforcement also contains a reciprocity requirement.”
“According to Hilton, a diversity case from the pre‑Erie era, foreign judgments shall be recognized so long as [1] the rendering court afforded an opportunity for full and fair proceedings; [2] the court was of competent jurisdiction over the persons and subject matter; [3] the [foreign] court conducted regular proceedings, which afforded due notice of appearance to adversary parties; and [4] the court afforded a system of jurisprudence likely to secure an impartial administration of justice between the citizens of its own country and those of other countries. See Hilton supra at 202‑03. The Hilton rule also requires reciprocity in the recognition and enforcement of United States judgments from the jurisdiction of the rendering court. Id. at 210, 226‑27.”
“With respect to the recognition of foreign country judgments, Massachusetts, like many other states of the Union, has enacted a version of the [UFMJRA]. This [statute] clearly requires that the rendering court have personal jurisdiction over the defendant in order for the resulting judgment to be recognized in Massachusetts. The statute does not state explicitly, however, whether the correctness of that exercise of jurisdiction by the rendering court ought to be determined according to the law of the rendering or [of] the enforcing jurisdiction. The district court suggested that there is currently a division of authority on this question among the states that have enacted a form of the [UFMJRA]. The district court also noted that the Supreme Judicial Court of Massachusetts has not yet spoken squarely on the matter.” [142‑43].
“The district court, faced with the ambiguity about the prevailing rule in Massachusetts with respect to the law governing personal jurisdiction in the rendering court, explicitly declined to resolve the matter and instead applied the governing rule of both jurisdictions. On appeal, neither party has contended that the district court erred in this regard….”
“We turn, then, to the question of whether Defendant established that the Superior Court of Quebec [had] properly exercised personal jurisdiction over Plaintiff. In the district court, Defendant submitted the affidavit of a Canadian attorney and argued that the Québec court properly exercised jurisdiction under Article 3136 of the Quebec Civil Code….” [143‑44].
It provides that “[e]ven though a Quebec authority has no jurisdiction to hear a dispute, it may hear it, [1] if the dispute has a sufficient connection with Québec, [2] where proceedings cannot possibly be instituted outside Québec or [3] where the institution of such proceedings outside Québec cannot reasonably be required. Civil Code of Quebec, R.S.Q., ch. 64, art. 3136. … Moreover, the opinion of the district court appears to have interpreted Defendant’s position as relying entirely on this provision …
“There are two problems with this analysis. First, the Quebec provision relied upon by Defendant, Article 3136, is clearly a provision that permits Quebec courts to assume personal jurisdiction over parties in exceptional cases when there is no other available jurisdiction to which the parties may litigate their dispute. See GreCon Dimter, Inc. v. J.R. Normand, Inc., [2005] 2 S.C.R. 401 ¶ 33. Such a situation is clearly not the case here. The litigants are American corporations which are amenable to suit in the state of their corporate domicile and, with respect to particular transactions, in the states where they have the requisite minimum contacts with the other party and with the transaction at issue in the lawsuit.”
“Because there obviously are other forums quite able to assume jurisdiction over the parties, we must conclude that Defendant has not carried its burden of establishing that this provision can serve as an adequate basis for jurisdiction over Plaintiff in the courts of that province. … Under these circumstances, we normally would have little difficulty in concluding that Defendant had not met its burden of establishing that the Quebec court had personal jurisdiction over Plaintiff on the basis of Article 3136.” [144].
“First, … the district court indicated to the parties that it believed Quebec’s Code authorized jurisdiction if the contract had been made in Quebec or if the cause of action had arisen there. Additionally, Plaintiff, … explicitly admits in its brief before this court that the Québec court could have had jurisdiction if the contract had been concluded in Quebec or if the cause of action arose in Quebec”.
“Under these circumstances, we must conclude that Defendant may be able to demonstrate that the Quebec court was authorized to exercise jurisdiction if it can demonstrate [1] that a contractual relationship was established with Plaintiff in Quebec or [2] that there was a breach of that agreement in Quebec or that one of the obligations arising from the contract was to be performed in the Province. A provision of the Civil Code of Quebec authorizes the exercise of jurisdiction on these bases. [Cite]. ….”
“… [T]he district court took the view that the authority of Quebec to exercise jurisdiction over Plaintiff had been established because all of the orders, communications, payments, correspondence and dealings’ between the parties had taken place through Defendant’s Montreal office. … The district court also concluded that the parties had [in fact] agreed to create a product showroom to display Plaintiff’s products to potential customers and sales agents from New England and Canada.”
“An examination of the record makes clear, however, that the district court’s factual conclusions were not undisputed. … Plaintiff denied, explicitly, any joint venture to establish a showroom in Montreal. Indeed, none of the affidavits make explicit the precise relationship between the alleged showroom and the specific sales of allegedly defective products by Plaintiff. Under these circumstances, it is clear that genuine issues of fact remain to be resolved before the authority of Quebec to exercise personal jurisdiction over Plaintiff can be established. …” [145].
“The exercise of personal jurisdiction over a defendant such as Plaintiff is governed by the Commonwealth’s long‑arm statute insofar as the exercise of jurisdiction also comports with the requirements of the federal Due Process Clause.[Cite] … The Massachusetts long‑arm statute permits the exercise of personal jurisdiction when a person has transacted business within the Commonwealth or when the person has contracted to supply services or things within the Commonwealth. This conferral of jurisdiction creates a specifically affiliating jurisdictional nexus; the personal jurisdiction conferred is only with respect to litigation arising out of the transaction within the Commonwealth, …”
“ ‘First, the claim underlying the litigation must directly arise out of, or relate to, the defendant’s forum‑state activities. Second, the defendant’s in‑state contacts must represent a purposeful availment of the privilege of conducting activities in the forum state, thereby invoking the benefits and protections of that state’s laws and making the defendant’s involuntary presence before the state’s courts foreseeable. Third, the exercise of jurisdiction must, in light of the Gestalt factors, be reasonable.’”
“The Gestalt factors that a court will consider include: ‘[1] the defendant’s burden of appearing, [2] the forum state’s interest in adjudicating the dispute, [3] the plaintiff’s interest in obtaining convenient and effective relief, [4] the judicial system’s interest in obtaining the most effective resolution of the controversy, and [5] the common interests of all sovereigns in promoting substantive social policies.”
“The Quebec Superior Court’s exercise of personal jurisdiction over Plaintiff did not contravene traditional notions of fair play and substantial justice. Plaintiff had several contacts with Quebec. All the orders, communications, payments, correspondence and dealings between Parties occurred through Defendant’s Montreal office. Moreover, [the] Parties agreed to create a product showroom at Defendant’s Montreal office, which was ultimately constructed. The purpose of this showroom was to display Plaintiff’s products to potential customers and sales agents from Canada and New England.”
“However, as we have noted in our earlier discussion of the Quebec jurisdictional statute, the affidavits supplied by the parties were in conflict. … [on the key issues]. Furthermore, … [a]bsent from the district court’s analysis is any discussion of the ‘Gestalt factors,’ which, we have made clear, a court must consider to determine the fairness of subjecting the defendant to a foreign jurisdiction. …” [147].
“Jurisdiction in these circumstances may not be avoided merely because the defendant did not physically enter the forum State. Although territorial presence frequently will enhance a potential defendant’s affiliation with a State and reinforce the reasonable foreseeability of suit there, it is an inescapable fact of modern commercial life that a substantial amount of business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. So long as a commercial actor’s efforts are purposefully directed toward residents of another State, we have consistently rejected the notion that an absence of physical contacts can defeat personal jurisdiction there.”
“Because the district court resolved material issues of fact against Plaintiff, the nonmoving party, the judgment must be reversed. The controverted issues of fact that Plaintiff has raised must be resolved. Accordingly, the judgment of the district court is reversed and the case is remanded for proceedings consistent with this opinion.” [148].
Citation: Evans Cabinet Corp. v. Kitchen International Inc., 593 F.3d 135 (1st Cir. 2010).
Filed in: 2010 International Law Update, Issue 2
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In case of a foreign banking conglomerate involved in a leveraged bond scheme, the Court of Appeal of California rules that the California trial court had personal jurisdiction over the defendants, where bank representatives solicited business in person in the State of California
The Anglo Irish bank, a corporation with its principal place of business in Ireland, is the parent company of the Isle of Man bank and the trust company, corporations with their principal places of business in Isle of Man. The Irish bank, Isle of Man bank and the trust company sought investors to borrow funds form the Isle of Man bank to purchase bonds to be held by the trust company. In March 2000, Davies, who was at that time managing director of the trust company, and Connolly, who was at that time director of the Isle of Man bank, met with 10 or 11 potential investors in California.
Kal Brar and Imelda Brar (“plaintiffs”�), California residents, are co-trustees of the Satnam Trust. Plaintiffs transferred more than $4 million form the Satnam Trust to the Kivrar Trust, that had been created to purchase bonds. After meeting with Davies and Connolly, plaintiffs appointed the trust company trustee of the Kivrar Trust. In June 2000 the Kivrar Trust II was created. The Kivrar Trust II borrowed funds to purchase additional bonds. The plaintiffs’ investments suffered losses, estimated to be approximately $2 million by December 2007.
Plaintiffs filed suit against Anglo Irish bank, Isle of Man bank, the trust company and others (“defendants”�) in May 2005, alleging intentional misrepresentation, fraudulent concealment, securities fraud, breach of fiduciary duty, negligent misrepresentation and an accounting.
Defendants moved to quash service for lack of personal jurisdiction. The trial court denied the motion finding that each defendant had sufficient contacts with the State to be subject to specific personal jurisdiction. Defendants Appealed to the Court of Appeal of California filing petitions for a writ of mandate, challenging the denial of their motions to quash. The Court of Appeals stayed the trial court proceedings and issued an order to show cause. After considering the case the Court of Appeals denied the petitions and lifted the stay of trial court proceedings and discharged the order to show cause. [Slip Op. 1 2].
“The proper jurisdictional question is not whether the defendant can be liable for the acts of another person or entity under state substantive law, but whether the defendant has purposefully directed its activities at the forum state by causing a separate person or entity to engage in forum contacts.”�
“Davies, Connolly, and McGee visited California for the purpose of engaging in economic activity with California residents. Contrary to Petitioners’ argument that they only sought to satisfy Isle of Man’s “know your customer”� requirements, the purpose of satisfying those requirements was to make the leveraged investments possible. They discussed leveraging “with profit bonds”� with the [plaintiffs] and other potential investors during the visit by Davies and Connolly in March 2000, McGee’s visit a few months later, and Davies’s visit in May 2001. Through those visits, they succeeded in garnering millions of dollars in investments from California residents.”�
“… [W]e conclude that the Irish bank, the Isle of Man bank, and the trust company purposefully directed their activities at California residents by and through the individuals who visited California on their behalf. We conclude further that Petitioners, and each of them, purposefully derived benefit from their activities in California and deliberately engaged in significant activities within this state, and that they therefore purposefully availed themselves of forum benefits.”� [Slip Op. 5]
“[Defendants] argue that after creating offshore trusts for the apparent purpose of removing assets from the jurisdiction of California courts, the plaintiffs should not be allowed to sue foreign defendants in California courts “just because their investment did not prove as fruitful as they had hoped.”� We conclude that by investing in foreign trusts, the plaintiffs did not waive the right to sue Petitioners in a California court to seek redress for injuries related to or arising out of Petitioners’ California activities. Moreover, the plaintiffs do not allege only that the investments were unsuccessful, but that Petitioners made material misrepresentations and omissions in California in connection with the investments.”� [Slip Op. 6]
Citation: Anglo Irish Corporation, PLC v. Superior Court of Los Angeles County, B206714 (Cal. App. 2008).
Filed in: 2008 International Law Update, Issue10
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Where Arizona court convicted Mexican citizen of solicitation to commit smuggling, Arizona Court of Appeals rules that Arizona courts may exercise subject matter jurisdiction over charge, even where Defendant completed solicitations in Mexico, since offense would involve travel to Arizona
Authorities arrested Andres Coz Flores (Defendant) after being discovered with other aliens in Maricopa County Arizona. Defendant told police that he had contracted with an unknown person in Mexico to transport Defendant into Los Angeles. a grand jury indicted Defendant for conspiracy to commit smuggling and pled guilty to solicitation to commit smuggling.
Defendant later moved for post conviction relief, arguing that he had completed the crime of solicitation within Mexico and that, therefore, the Arizona Courts lack subject matter jurisdiction. The trial court denied the motion stating that, “the admitted criminal conduct constituted the offense of solicitation to commit human smuggling. This offense, like conspiracy, was ongoing and was committed in significant part in Maricopa County, where the Defendant and co Defendants were ultimately arrested.”�
Defendant appealed to the Arizona Court of Appeals which affirms the conviction.
The Court outlines the issue as follows. A plea agreement waives all non jurisdictional defects. A Defendant, however, cannot waive subject matter jurisdiction, not even by a guilty plea, and he can raise it at any time. Here, it is undisputed by the parties that, while in Mexico, Defendant solicited another person to smuggle him into Arizona. Thus, Defendant committed the crime of solicitation while in Mexico. None of Defendant’s conduct that constituted any element of the offense took place in Arizona. Arizona has statutory jurisdiction over crimes where the conduct constituting any element of the offense or a result of such conduct occurs within Arizona.
Before deciding whether Arizona has statutory jurisdiction, the Court first examines whether there are federal constitutional limitations to Arizona’s jurisdiction. Of special concern are Article I, Section 10, and the Supremacy Clause in Article VI, Clause 2.
“Because the text of A.R.S. Section 13 108 may fairly be construed to give Arizona jurisdiction “�over crimes having any contact with this state,’[Cite], criminal jurisdiction should reach the extent permitted under federal and international law.”�
“… [T]he power to regulate immigration is exclusively a federal power. DeCanas v. Bica, 424 U.S. 351, 354 (1976). But the Court has never held that every state enactment which in any way deals with aliens is a regulation of immigration and thus per se pre empted by this constitutional power, whether latent or exercised. In DeCanas, the Supreme Court outlined three ways in which state statutes related to immigration may be preempted: (1) if the state statute actually regulates immigration, (2) if it was the “�clear and manifest purpose of Congress’ to preclude even “�harmonious state regulation touching on aliens in general;’ and (3) if the state law “�stands as an obstacle to the accomplishment and execution of the full purpose and objectives of Congress,’ [Cite].”�
“Arizona’s human smuggling statute does not regulate immigration, because it does not regulate “�who should or should not be admitted into the country, and the conditions under which a legal entrant may remain.’ [Cite]. The statute simply prohibits the knowing transportation of illegal aliens for profit or commercial purpose, requiring as an element of the offense that the persons transported be illegal aliens. The statute does not thereby determine the legality of a person’s presence in the U.S.. Thus, it does not constitute a state regulation of immigration, and it is not preempted on this ground. [Cite].”�
“Arizona’s human smuggling act is not preempted by a “clear and manifest”� purpose of Congress to prevent states from adopting even harmonious regulations prohibiting the smuggling of illegal aliens… There is no indication in the [Immigration and Nationality Act] or its history that Congress intended to preclude harmonious state regulation touching on the smuggling of illegal aliens in particular.”�
“Arizona’s human smuggling law is not preempted because it neither conflicts with federal law nor stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress in enacting the INA. [Cite]. Rather, we find that Arizona’s human smuggling law furthers the legitimate state interest of attempting to curb “�the culture of lawlessness’ that has arisen around this activity by a classic exercise of its police power. Moreover, to a large extent, Arizona’s objectives mirror federal objectives.”�
The Court notes that, under the so called Effects Test, acts done outside State X but intended to produce and actually producing detrimental effects within State X, permit State X to punish the one who caused the harm as if he had been present at the effect.
Citation: State v. Flores, 218 Ariz. 407, 188 P.3d 706 (Ariz. App. 2008).
Filed in: 2008 International Law Update, Issue7
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In Colorado action by off shore company against its Swiss administration company, Tenth Circuit upholds dismissal for lack of minimum contacts where Colorado based corporate attorney allegedly misappropriated funds; the Court rejects agency theory for creating jurisdiction in Colorado; Swiss law may apply by virtue of the choice of law clause in the agreement and require the Plaintiff to pay Defendant’s attorneys’ fees and costs
Michael Ladney, a Florida business, sought to protect his assets through various foreign corporations. He purchased Melea Ltd. (“Melea”), a Gibraltar corporation, and transferred assets to it. Melea received the assets, including the patents, from the trusts and corporations formed for Plaintiff’s benefit. These trusts and corporations eventually became the owners of all shares and interests in Melea. The purpose of this complex arrangement was apparently to provide the illusion that Melea’s affairs were being conducted from abroad, while they were in fact being run from the United States.
Melea retained Jawer, S.A. (“Jawer”), a Swiss corporation, to administer Melea’s finances. Jawer eventually entered into a Fiduciary Mandate, giving Jawer the power to open bank accounts, appoint Melea’s directors and representatives, and ensure that the representatives acted in Melea’s interest.
In 1996, Melea retained a Colorado attorney, Barry Engel, who served the company until 2002. Melea alleges that Jawer permitted Engel to bill as he pleased, and overcharged for his services.
Melea filed the present action in federal district court in Colorado, alleging that Jawer breached its fiduciary duties by letting a Colorado lawyer overcharge Melea and misappropriate Melea’s funds.
The district court granted Jawer’s motion to dismiss for lack of personal jurisdiction, because Jawer did not have the necessary minimum contacts with Colorado. Melea appeals.
The U.S. Court of Appeals for the Tenth Circuit affirms the dismissal. The Court, however, remands Jawer’s motion for damages and attorneys fees under Swiss law to the district court.
The Court first outlines the general rules for the review. “When evaluating personal jurisdiction under the due process clause, we conduct a two step analysis. At the first step, we examine ‘whether the non resident defendant has ‘minimum contacts’ with the forum state such that he should reasonably anticipate being haled into court there.’ … If the defendant has sufficient contacts, we then proceed to the second step. … At this step, ‘we ask whether the court’s exercise of jurisdiction over the defendant offends ‘traditional notions of fair play and substantial justice,’‘ that is, whether the exercise of jurisdiction is ‘reasonable’ under the circumstances. … The district court considered both steps of the analysis and concluded that neither supported the exercise of jurisdiction over Jawer. We need only consider the first of these steps, as we conclude that Jawer had insufficient contacts with Colorado to permit the exercise of jurisdiction over it in that state.”
“The ‘minimum contacts’ test may be met in either of two ways. First, if a defendant has ‘continuous and systematic general business contacts’ with the forum state, it may be subjected to the general jurisdiction of the forum state’s courts. Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 414 16 (1984). It is clear that Jawer’s contacts with Colorado are not ‘continuous and systematic’ enough to give rise to general jurisdiction over Jawer in Colorado. Jawer maintains no office or other place of business in Colorado, is not registered to do business in Colorado, does not solicit customers in Colorado, and has neither bank accounts nor property there. Its contacts with Colorado were almost exclusively limited to Jawer’s communications with Engel on behalf of Melea, which itself did not conduct business in Colorado, short of employing an attorney there. Other than its communications with Engel, which ceased in 2002, Jawer’s only contacts with Colorado came during brief trips on unrelated business.”
“Second, even in the absence of ‘continuous and systematic’ contacts, a state’s courts may exercise specific jurisdiction over a defendant that ‘purposefully directed’ its activities at the state’s residents, if the cause of action arises out of those activities. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472 73 (1985). Analyzing whether Colorado courts may exercise specific jurisdiction over Jawer requires a lengthier discussion.” [Slip op. 5 6]
The Court then applies this to the facts at issue. Jawer contracted with Melea for administrative services, and thus had to make payments to Engel in Colorado. It appears that Jawer did not have a choice in this matter, and thus did not purposefully direct such actions towards Colorado. It is unclear though whether Jawer’s communications with Engel were “purposeful,” as there is no evidence in the record that Jawer was contractually obligated to work with Engel. It is possible though, and the facts would have to be developed further.
Even though Jawer may have had purposeful contacts, the Court must also ascertain whether Melea’s cause of action arises out of those contacts. This requirement is not met. Here, Jawer’s alleged breaches of its fiduciary duties to Melea consisted of (1) its failure to review the fees that Engel charged, and (2) disburse funds to Engel. All of these acts occurred in Switzerland.
Melea attempts to circumvent this requirement by arguing that Jawer delegated responsibility to Engel and thus made him his agent in Colorado.
“The argument that Engel was Jawer’s agent is premised on the theory that Jawer transferred ‘the execution in part or total of the Contract of Mandate’ to Engel in accordance with the conditions to the Fiduciary Mandate. … This theory is untenable. The evidence indicates simply that Engel served as an intermediary through whom all of Melea’s bills were transmitted to Jawer. At times, he also recommended the payment of certain invoices. Other than receiving Melea’s invoices and sending them to Jawer, though, Engel took no actions for Jawer in Colorado. He did not perform any of the acts specified as Jawer’s duties in the Fiduciary Mandate: he did not open or operate Melea’s bank accounts, designate any representatives of Melea, or otherwise perform any administrative acts for Melea.”
“An agent is one who acts on another’s behalf and is subject to the other’s control. Restatement (Second) of Agency Section 1(1) … There is no indication that Jawer had control over, or even the right to control, Engel’s actions. Engel was not employed by Jawer; he was employed by Melea.” [Slip op. 10]
In sum, Jawer’s contacts with Colorado (primarily communications with an attorney in Colorado) are insufficient for personal jurisdiction. Jawer’s alleged shortcomings occurred in Switzerland, not Colorado.
Finally, the Court considers Jawer’s claim that Swiss law applies to the dispute, based on the choice of law of the Fiduciary Mandate, and Jawer should be awarded attorneys fees and costs. Melea argues that Jawer failed to provide prior notice under Fed.R.Civ.P. 44.1. The Court disagrees. Rule 44.1 provides that, in determining foreign law, a court may consider any relevant material regardless of admissibility under the rules of evidence. The Court therefore remands the case for a determination of whether the choice of law clause is enforceable and whether it mandates the application of Swiss law to the issue of attorneys’ fees and costs.
Citation: Melea, Ltd. v. Jawer SA, No. 07 1127 (10th Cir. December 26, 2007).
Filed in: 2007 International Law Update, Issue12
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Federal district court lacks jurisdiction based on diversity when alien corporations are present on both sides of the controversy, even if one Party maintains its principal place of business in the United States
Plaintiffs, including a Grand Cayman Islands corporation, brought suit in a U.S. federal district court on claims of fraud and breach of contract against a South Korea corporation and a citizen of South Korea. Defendants moved to dismiss the suit, asserting that the district court lacked jurisdiction, and the motion was granted. Plaintiffs appealed to the Sixth Circuit, which affirmed the district court’s ruling.
Plaintiffs argued that complete diversity existed under 28 U.S.C. §1332(a)(2) because Peninsula Asset Management Cayman Ltd. maintained its principle place of business in the United States, even though it was incorporated under the laws of the Grand Cayman Islands. The Court rejected this argument, asserting that it is well established that, under §1332(a)(2) even if a foreign corporation maintains its principal place of business in a State, and is considered a citizen of that State, diversity is defeated if another alien party is present on the other side of the litigation (citing Creaciones Con Idea, S.A. de C.V. v. Mashreqbank PSC, 232 F.3d 79, 82 (2d Cir. 2000)).
The Court also determined that jurisdiction could not be predicated on the basis of 28 U.S.C. §1332(a)(3), which has been interpreted as not requiring complete diversity, because there was not a United States citizen on each side of the dispute.
The only applicable section is § 1332(a)(2), requiring complete diversity. Complete diversity is lacking in this case, and thus the Court remands for consideration whether the case should be dismissed for lack of subject matter jurisdiction.
Citation: Peninsula Asset Management Cayman Ltd. v. Hankook Tire Co., Ltd., (6th Circuit, December 13, 2007).
Filed in: 2007 International Law Update, Issue11
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Ontario Court of Appeal rules that libel suit by recent provincial resident against U.S. newspaper and reporters lacks “real and substantial” connection to Ontario required for assumption of jurisdiction
Cheickh Bangoura (plaintiff) sued the Washington Post and three of its reporters Messrs. Branigin, Rupert, and Buckley (defendants) plus the United Nations and Fred Eckhard (later dropped from the case) over two newspaper articles, which he claims are defamatory. When the Post published the articles in January 1997, plaintiff was working for the United Nations in Nairobi, Kenya. The articles had to do with plaintiff’s behavior in a prior position with the U.N. in the Ivory Coast.
Plaintiff was born and raised in Guinea on Africa’s west coast. Between 1987 and 1993, he served with the United Nations in Austria. In September 1993, he was seconded to the United Nations Drug Control Program (UNDCP) in the Ivory Coast as assistant regional director for West Africa, where he remained until December of 1994. The U. N. then transferred him to the UNDCP in Nairobi, Kenya under a contract that was to expire at the end of January 1997. In Kenya, Mr. Bangoura was assistant regional director of the UNDCP regional office for Eastern and Southern Africa.
On Sunday, January 5, 1997, the Washington Post published an article under the headline, “Cloud of Scandal Follows UN Drug Control Official: Boutros Ghali Ties Allegedly Gave Protection”. The article refers specifically to plaintiff and alleges that his UN colleagues had accused him of sexual harassment, financial improprieties and nepotism during his tenure in the Ivory Coast. The article suggests that he had evaded punishment in part by invoking close ties to Mr. Boutros Ghali, the former UN Secretary General, a close friend of plaintiff’s father in law. The UN suspended plaintiff from his job as assistant regional director on January 9, 1997.
On Friday, January 10, 1997, the Washington Post published a second article under the headline, “UN Removes African from Drug Agency: Controversial Envoy’s Misconduct Cited”. The second article repeated the previous allegations of misconduct.
In February 1997, plaintiff joined his wife and two children in Montreal, where they had moved in December 1996. He and his family lived in Montreal until June 2000, when they moved to Ontario in the Brampton area. Plaintiff filed this action in April 2003. In his statement of claim, plaintiff asked for the following relief against the Washington Post. First, he wanted the court to order the Post to remove the offending articles from its web site and to publish a retraction.
Moreover, he also sought damages of $5 million for intentional interference with prospective economic advantage and inducing a breach of employment contract. In addition, he wanted damages of $1 million each for intentional infliction of mental anguish, for negligence for its refusal to retract and to promptly remove the damaging statements from its web site. Finally, he demanded $2 million in punitive damages.
William Branigin lived in Washington, D.C. in 1997. He now lives in Reston, Virginia, a Washington suburb. James Rupert was a foreign correspondent for the Washington Post in Abidjan, Ivory Coast. He now lives in the state of New York. Steven Buckley was a foreign correspondent for the Washington Post in Nairobi, Kenya. He now lives in Florida.
WP Company LLC carries on business as The Washington Post. It is a wholly owned subsidiary of The Washington Post Company, which has its head office in the city of Washington. The circulation of the Washington Post on Sunday, January 5, 1997, was about 1,106,968. The Post distributed roughly 95% of its newspapers in the Washington metropolitan area. About 781,704 copies of the Washington Post went out on Friday, January 10, 1997 over 95% in the greater District of Columbia area. In both instances, only 7 copies got to subscribers in Ontario.
The Post also published the two challenged articles on the Washington Post Web site, making them available free of charge for fourteen days following publication. Only one person in Ontario, plaintiff’s counsel, has accessed the articles through the paid archive. The Washington Post has a small office in Toronto for use by a reporter for news-gathering purposes.
At the time of publication, the plaintiff did not live in Ontario. When he filed this action, more than six years after the publication of the articles, plaintiff had been an Ontario resident for about three years.
The newspaper defendants challenged the jurisdiction of the Ontario courts over them. They urged that there is no real and substantial connection between this action and Ontario or between the Post and Ontario. In dismissing the motion, the Superior Court of Justice held that it was appropriate for the Ontario courts to take jurisdiction. The Washington Post and its reporters appealed the order of the motion judge.
The appellate court seems to agree that the motion judge had rightly analyzed the jurisdictional situation under the eight factors spelled out in Muscutt v. Courcelles (2002), 60 O.R. (3d) 20 (C.A.). Nevertheless, it unanimously allows the appeal on the grounds that the judge had misapplied these factors in this case.
The first element is the extent of the link between the forum and plaintiff’s lawsuit. “The connection between Ontario and [plaintiff's] claim is minimal at best. In fact, there was no connection with Ontario until more than three years after the publication of the articles in question. Even if the connection is significant, however, the case for assuming jurisdiction is proportional to the degree of damage sustained within the jurisdiction. It is difficult to justify assuming jurisdiction against an out of province defendant unless the plaintiff has suffered significant damage within the jurisdiction.” [¶ 22]
Plaintiff’s affidavit asserting local damage was not helpful to his case. “No details are provided. The distribution of the articles was minimal. Only [plaintiff's] lawyer accessed the two articles on the Washington Post Internet database. Whatever damages were suffered by [plaintiff's] losing his job with the UN, more than three years before he took up residence in Ontario, are not damages suffered in Ontario. In my view, there is no evidence that [he] has suffered significant damages within Ontario.” [¶ 23]
On the second factor, the motion judge held that the defendants had no connection to Ontario. He did note “that the Washington Post is a major newspaper which is ‘often spoken of in the same breath as the New York Times and the London Telegraph.’”
In the Court’s view, “there is no significant connection between the Washington Post defendants and Ontario. I cannot agree with the motion judge when he concluded that the appellants ‘should have reasonably foreseen that the story would follow the plaintiff wherever he resided.’ It was not reasonably foreseeable in January 1997 that [plaintiff] would end up as a resident of Ontario three years later. To hold otherwise would mean that a defendant could be sued almost anywhere in the world based upon where a plaintiff may decide to establish his or her residence long after the publication of the defamation.” [¶ 25]
The third factor is the degree of unfairness, if any, to the defendant in assuming jurisdiction. On this the motions judge opined that: “[w]hile the personal defendants have no connection to Ontario, the Post is a newspaper with an international profile, and its writers influence viewpoints throughout the English speaking world. I would be surprised if it were not insured for damages for libel or defamation anywhere in the world, and if it is not, then it should be.”[¶ 26] The Court of Appeal disagrees, however, pointing to the complete lack of record evidence about the Post’s insurance coverage.
Element 4 inquires whether there would be any unfairness to the plaintiff in not assuming jurisdiction. “Although unfairness to the plaintiff in not assuming jurisdiction might often be a powerful factor within a Muscutt analysis, it must be remembered that the plaintiff had no connection with Ontario until more than three years after the publication of the articles in question. … If the plaintiff’s evidence does not support such a [real and substantial] connection elsewhere within the Muscutt analysis, it becomes increasingly difficult to accord weight to this factor.” [¶ 29]
The fifth factor looks at the involvement of other parties in the suit. “The motion judge stated … that ‘the involvement of other defendants residing respectively in New York and Florida is a factor, in my view, in favour of the plaintiff’s choice of forum.’ In my view, [however], the fact that two of the personal defendants now live in New York and Florida does not favour Ontario. This factor relates more to a forum conveniens argument than to the assumption of jurisdiction. In any event, the main defendant, the Washington Post, is located in Washington, D.C., and the remaining personal defendant, William Branigin, resides in nearby Virginia.” [¶¶ 30-31]
The forum court’s willingness to recognize and enforce an extra provincial judgment rendered on the same jurisdictional basis constitutes element number 6. On this, the Court declares that, “it must be remembered that on the evidence presented before the motion judge, the articles did not reach significantly into Ontario. As I have mentioned, [plaintiff's] lawyer was the only person in Ontario to access the two articles on the Washington Post Internet database. … [Taking this element too far] could lead to Ontario publishers and broadcasters being sued anywhere in the world with the prospect that the Ontario courts would be obliged to enforce foreign judgments obtained against them.” [¶ 34]
Finally, the Courts should inquire the extent to which comity and the standards of jurisdiction, recognition and enforcement prevailing elsewhere support Ontario jurisdiction. “In considering this factor, the motion judge referred to New York Times Co. v. Sullivan, 376 U.S. 254, 280 (1964), a judgment of the United States Supreme Court, and Hill v. Church of Scientology, [1995] 2 S.C.R. 1130, a judgment of the Supreme Court of Canada. In New York Times v. Sullivan, the United States Supreme Court held that public officials could only succeed in a defamation claim where they could establish that the defamatory statement was made ‘with knowledge that it was false or with reckless disregard of whether it was false or not.’ In Hill v. Scientology, the Supreme Court of Canada refused to adopt the so called actual malice rule in New York Times v. Sullivan.”
“Courts in the District of Columbia and in other American jurisdictions have uniformly held that libel judgments rendered in foreign courts where the law does not comport with the principle set forth in New York Times Co. v. Sullivan and its progeny are repugnant to the public policy of those jurisdictions and must therefore be denied recognition.” [¶¶ 36-37]
The court below chalked this up to a lamentable lack of comity. The Court of Appeal disagrees. “The motion judge’s conclusion does not take into account that the rule in New York Times v. Sullivan is rooted in the guarantees of freedom of speech and of the press under the First Amendment of the U. S. Constitution. In any event, the reality is that American courts will not enforce foreign libel judgments that are based on the application of legal principles that are contrary to the actual malice rule.”
“Although the Supreme Court of Canada has rejected the rule for perfectly valid reasons, it is, in my view, not correct to say that the American courts’ unwillingness to enforce a Canadian libel judgment is ‘an unfortunate expression of lack of comity’. Canada and the U.S. have simply taken different approaches to a complex area of the law, based upon different policy considerations related to freedom of speech and the protection of individual reputations. The Supreme Court of Canada has recognized that Canadian courts may refuse to enforce a judgment of a foreign court which is deemed to be contrary to the Canadian concept of justice.” [¶¶ 39-40].
“As a result of the above analysis, I conclude that the motion judge erred in his application of the Muscutt factors. This leads me to conclude further that there is simply no real and substantial connection between this action and Ontario and that it is not appropriate for the courts of Ontario to assume jurisdiction.” [¶ 46]
Citation: Bangoura v. Washington Post, C41379, 2005 WL 2254668 (Ont. C.A.) 2005, Carswell Ont . 4343 (Sept. 16).
Filed in: 2005 International Law Update, Issue 9
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Federal Circuit vacates jurisdictional dismissal in patent dispute between French government research agency and major international manufacturers, and remands for allowance of jurisdictional discovery denied by lower court
Commissariat a L’Energie Atomique (CEA) is a French government research agency that develops new technologies for sale and licensing to the private sector. CEA owns, inter alia, two patents dealing with the manufacture of liquid crystal displays (LCDs) used in the latest computer monitors and television screens. Chi Mei Optoelectronics Corporation (CMO) is the third largest LCD module manufacturer in the world and one of the manufacturers whom CEA had sued for alleged patent infringement in Delaware federal court during 2003.
CMO moved to dismiss CEA’s case for lack of personal jurisdiction. CEA had submitted data showing that CMO sells over $1 billion of products worldwide, of which about 30 percent are sold in the U.S. through distributors, including in Delaware. In support of its motion, CMO submitted documents showing that it had no direct connection with Delaware.
The district court then dismissed CEA’s action for lack of personal jurisdiction because it had failed to show that CMO was deriving substantial revenue specifically from Delaware. CEA appealed the district court’s jurisdictional dismissal. The U.S. Court of Appeals for the Federal Circuit, however, vacates and remands because the district court erred in denying CEA’s request for jurisdictional discovery.
The Court emphasizes that, for personal jurisdiction under case precedent, the tortious injury caused by the patent infringement must take place within the state where the allegedly infringing sales are made.
“In order to establish personal jurisdiction in a patent infringement case over a non-resident defendant whose products are sold in the forum state, a plaintiff must show both that the state long arm statute applies and that the requirements of due process are satisfied. …”
“Contrary to the district court’s holding, the evidence already presented by plaintiff is sufficient to demonstrate that CMO sells a very large volume of LCDs to companies which incorporate these displays into their final product and that these products are likely sold in Delaware in substantial quantities. …”
“The district court imposed too high a burden of proof on CEA. Based on the allegations in the complaint, the evidence submitted by CEA, and CMO’s failure to rebut the factual inference that devices incorporating its LCDs were sold in Delaware, the district court should have found CEA’s showing sufficient to establish that substantial revenues could be derived by CMO from the sales of products in Delaware incorporating CMO’s LCDs.” [Slip op. 11-12]
The Court then turns to the “stream of commerce” theory. “The scope of the stream of commerce theory under Delaware law is not clear, and the issue has yet to be directly addressed by the Delaware Supreme Court. In [Boone v. Oy Partek Ab, 724 A.2d 1150 (Del. Super. Ct. 1997)], the Court held that the stream of commerce theory is available under [Del. Code Ann. Tit. 10, Section 3104( c)(4)]. … However, it is not clear 1) whether proof of an ‘intent or purpose to serve the Delaware market’ is required …, and 2) whether the Delaware long arm statute extends to the full extent that the due process clause would permit.”
“On the existing record, this case thus presents a factual scenario which would require us to determine whether or not additional conduct, beyond a showing of use of established distribution channels, is required to meet the demands of due process under the stream of commerce theory of personal jurisdiction. We have not had occasion to resolve that question, and we conclude that we should not do so on the inadequate record presented here.”
“Delaware law is unclear as to whether the proper interpretation of the long arm statute accords with Justice O’Connor’s or Justice Brennan’s view as expressed in [Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102 (1987)]. Delaware law is also unclear as to whether or not the long arm statute is coextensive with the due process clause. … The regional circuits, as well, remain divided on the proper due process standard. …”
“We conclude that there is substantial uncertainty concerning both the scope of the Delaware law and that of the due process clause, and that these issues should not be resolved on the present record because the district court declined to order jurisdictional discovery.” [Slip op. 13-19]
CEA, however, clearly made a sufficient threshold showing to merit a remand for jurisdictional discovery. Further, CEA has already gone beyond factual allegations and made a prima facie case for CMO’s use of an established distribution network that likely results in substantial sales of its products in Delaware. The Court, therefore, holds that the district court should have granted CEA’s discovery request; it seems likely to turn up evidence as to whether or not defendant intended to serve the Delaware market.
Citation: Commissariat a L’Energie Atomique v. Chi Mei Optoelectronics Corp., 395 F.3d 1315 (Fed. Cir. 2005).
Filed in: 2005 International Law Update, Issue2
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Second Circuit rules (1) that district court had subject-matter jurisdiction over state-owned Chinese corporation under “arbitration exception” to FSIA and (2) that court had specific personal jurisdiction over defendant
[For the preliminary facts, see ARBITRATION above.] Zhen Hua had moved to dismiss Titan’s petition for lack of subject matter jurisdiction, pointing out that state-owned Zhen Hua indisputably qualified as a “foreign state” under the FSIA. The district court agreed that Zhen Hua was presumptively entitled to immunity from suit but, inter alia, concluded that the company fell within the “arbitration exception” found in 28 U.S.C. Section 1605(a)(6)(B).
Zhen Hua had also challenged the district court’s personal jurisdiction over it. Remarking that subject matter and personal jurisdiction over foreign states are almost coextensive, the district court held that Zhen Hua’s contractual negotiations in the U.S. through Seagos, its broker, were enough to meet the demands of due process. Although Zhen Hua appealed both jurisdictional rulings, the U.S. Court of Appeals for the Second Circuit affirms.
In pertinent part, the “arbitration” exception provides that: “A foreign state shall not be immune from the jurisdiction of courts of the United States or of the States in any case (6) in which the action is brought, either to enforce an agreement made by the foreign state with or for the benefit of a private party to submit to arbitration all or any differences which have arisen or which may arise between the parties with respect to a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration under the laws of the United States, or to confirm an award made pursuant to such an agreement to arbitrate, if … (B) the agreement or award is or may be governed by a treaty or other international agreement in force for the United States calling for the recognition and enforcement of arbitral awards …”
The Circuit Court agrees with the district court that this exception applies for two reasons. First, both the U.S. and China are parties to the Convention, and second, the parties had formed a charter party agreement that contained an arbitration clause.
Zhen Hua’s only argument in reply went back to its theory that the ad hoc side agreement meant that the binding nature of the “alleged” charter party remains unsettled until the arbitrators decide the question in London. Having found that the lower court’s rejection of such a side agreement was not clearly erroneous, the appellate court has no difficulty in spurning Zhen Hua’s argument in the FSIA context.
In pitching its argument against personal jurisdiction by demanding a showing of substantial, continuous and systematic contacts with the U.S. as a whole, the Court notes that Zhen Hua ignored the fact that “specific” jurisdiction has a lower threshold than “general” jurisdiction. “Where, as here, the claim arises out of, or relates to, the defendant’s contacts with the forum, i.e., the negotiation of the charter party with an American corporation located in New York and the use of brokers in Connecticut, the defendant need only prove ‘limited’ or ‘specific’ jurisdiction. In such a case, the required minimum contacts exist where the defendant ‘purposefully availed’ itself of the privilege of doing business in the forum and could foresee being ‘haled into court’ there.” [Slip op. 15]
Finally, the Court sees in the record enough facts to show that the lower court’s exercise of specific personal jurisdiction was reasonable. “To facilitate the negotiations Zhen Hua utilized a broker located in Connecticut, which communicated with Titan personnel in New York via telex and/or facsimile to Titan’s broker in Connecticut. Having engaged in this commercial conduct, Zhen Hua should have foreseen the possibility of being ‘haled into [an American] court’ if a dispute were to arise out of the negotiations. Furthermore, Zhen Hua proffers no reason to believe that litigating in New York for the sole purpose of referring this matter to arbitration in London will impose or has imposed any undue hardship.” [Id.]
Citation: U.S. Titan, Inc. v. Guangzhou Zhen Hua Shipping Co., Ltd., 2001 WL 128004 (2nd Cir. Feb. 15).
Filed in: 2001 International Law Update, Issue 3
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European Court of Justice rules that jurisdictional provisions of Brussels Convention require plaintiffs domiciled outside European Union to comply with Convention rules when suing defendants domiciled in EU Member States
Universal General Insurance Company (UGIC), a Canadian insurance company with its registered office in Vancouver, is in liquidation. It brought a civil action in the French courts against Group Josi Reinsurance Company, S.A. (GJR), a Belgian reinsurance company with its registered office in Brussels, over an amount of money claimed by UGIC from GJR as a party to a reinsurance contract.
UGIC had instructed its broker, Euromepa, a French company, to obtain a reinsurance contract to take effect from April 1990 onward and dealing with a portfolio of comprehensive home-occupiers’ insurance policies centered in Canada. Euromepa offered GJR a shared-in reinsurance contract, representing that the “main reinsurers are Union Ruck with 24 percent and Agrippina Ruck with 20 percent.” In a fax dated April 6, 1990, GJR agreed to buy a 7.5 percent share in that contract.
It turned out that in March 1990, Union Ruck had already informed Euromepa that it intended to terminate its share after May 31, 1990. A few days later, Agrippina Ruck had told Euromepa that it would cut back its share to 10 percent, effective June 1 of that year. Both companies explained that their parent companies based in the United States had imposed certain changes in economic policy upon them, thus requiring their cutback.
In February 1991, Euromepa sent GJR a bill for Can. $ 54,679 for its share in the reinsurance transaction. The following month, GJR declined to pay, contending that false information had induced it to enter into the reinsurance contract. In July 1994, UGIC sued GJR in the Commercial Court of Nanterre, France.
GJR maintained that the Nanterre court lacked jurisdiction over the case since only the Tribunal de Commerce, Brussels, the situs of its registered office, had power to decide the case under the Brussels Convention. In July 1995, the Nanterre court upheld its jurisdiction. It reasoned that UGIC is a Canadian company without a place of business in the EU and thus the jurisdictional provisions of the Brussels Convention do not apply to it. The Court awarded judgment on the amount claimed by UGIC plus interest.
On appeal to the Cour d’Appel in Versailles, the Court decided in November 1998 to stay proceedings and to refer two issues to the ECJ for a preliminary ruling under Title II of The Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters, as amended (the “Brussels Convention”).
These questions are: (1) may a defendant established in a Contracting State rely upon the specific rules on jurisdiction set out in the Brussels Convention against a plaintiff domiciled in Canada? and (2) do the Convention’s specific rules pertaining to insurance litigation in Articles 7 to 12a apply to matters dealing with reinsurance?
The Sixth Chamber of the ECJ first outlines the general jurisdictional scheme of the Convention. “It is only by way of derogation from [the] fundamental principle, that the courts of the Contracting State in which the defendant has its domicile or seat are to have jurisdiction, that the Convention provides, under the first paragraph of Article 3 thereof, for the cases, exhaustively listed in Sections 2 to 6 of Title II, in which a defendant domiciled or established in a Contracting State may, where the situation is covered by a rule of special jurisdiction, or must, where it is covered by a rule of exclusive jurisdiction or a prorogation of jurisdiction, be excluded from the jurisdiction of the courts of the State in which it is domiciled and sued in a court of another Contracting State.” [para. 36]
After analyzing those of its cases which have construed those rare Convention provisions keyed on the plaintiff’s domicile, the Court responds to Question 1. “In those circumstances, the answer to the first question must be that Title II of the Convention is in principle applicable where the defendant has its domicile or seat in a Contracting State, even if the plaintiff is domiciled in a non member country. It would be otherwise only in exceptional cases where an express provision of the Convention provides that the application of the rule of jurisdiction which it sets out is dependent on the plaintiff’s domicile being in a Contracting State.” [para. 61]
The ECJ then addresses the second question. “First, according to settled case law, it is apparent from a consideration of the provisions of Section 3 of Title II of the Convention in the light of the documents leading to their enactment that, in affording the insured a wider range of jurisdiction than that available to the insurer and in excluding any possibility of a clause conferring jurisdiction for the benefit of the insurer, they reflect an underlying concern to protect the insured, who in most cases is faced with a predetermined contract the clauses of which are no longer negotiable and is the weaker party economically.” [para. 64]
This rationale, however, does not extend to reinsurance contracts. “The role of protecting the party deemed to be economically weaker and less experienced in legal matters than the other party to the contract which is fulfilled by those provisions, implies, however, that the application of the rules of special jurisdiction laid down to that end by the Convention should not be extended to persons for whom that protection is not justified.” [para. 65] No special protection seems to have been contemplated with respect to contracts between a reinsured and its reinsurer, both of whom are insurance professionals. In addition, Article 8 which provides for litigation at the domicile of the insured plaintiff is inapplicable here. “In the light of all the foregoing, the answer to the second question must be that the rules of special jurisdiction in matters relating to insurance set out in Articles 7 to 12a of the Convention do not cover disputes between a reinsurer and a reinsured in connection with a reinsurance contract.” [para. 76]
Citation: Group Josi Reinsurance Co. S.A. v. Universal General Ins. Co. (UGIC), Case C 412/98, [2000] Int. Lit. Proc. 549, [2000] All E.R. (EC) 653 (European Court of Justice [6th Chamber]).
Filed in: 2001 International Law Update, Issue 1
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In litigation over 1959 expropriation of Cuban oil concessions, Eleventh Circuit interprets federal long-arm provision, upholding dismissal of claims against Canadian corporations for lack of personal jurisdiction and providing guidance on quantity and quality of U.S. contacts needed for general personal jurisdiction
The former Cuban subsidiaries of Consolidated Development Corporation and Consolidated Cuban Oil & Gas Rights Corporation (hereinafter “Consolidated”) held oil concessions in the Republic of Cuba which that government expropriated in 1959. Consolidated filed this action for damages in 1996 against the Cuban State, four Cuban corporations, and two Canadian corporations and their affiliates.
The district court dismissed the claims against the Canadian corporations and their affiliates (“the Canadian defendants”) for failure to state a claim upon which relief may be granted. Consolidated appealed. The U.S. Court of Appeals for the Eleventh Circuit affirms the dismissal but on jurisdictional grounds.
Consolidated’s amended complaint relied on Fed.R.Civ.P. 4(k)(2), the national long-arm provision, as the basis for personal jurisdiction over the Canadian defendants. In cases — such as this one — where a defendant is not subject to the jurisdiction of the courts of general jurisdiction of any one state, Rule 4(k)(2) permits a court to aggregate a foreign defendant’s nationwide contacts to allow for service of process, as long as (1) plaintiff’s claims “arise under federal law,” and (2) the exercise of jurisdiction is “consistent with the Constitution and laws of the United States.” Here, the Court focuses on the first prong.
“Specific jurisdiction” arises out of a nonresident party’s purposeful activities in the forum that relate to the cause of action alleged in the complaint. “General personal jurisdiction” arises from a defendant’s substantial contacts with the forum that are unrelated to the cause of action being litigated. The due process requirements for general personal jurisdiction are more stringent than for specific personal jurisdiction, and require a showing of continuous and systematic general business contacts between the defendant and the forum state.
Here, Consolidated’s allegations in the complaint do not arise out of any contacts the Canadian defendants have with the United States. The cause of action involves properties in Cuba which the Cuban government had seized and which the Canadian defendants had allegedly developed. Therefore, any exercise of jurisdiction must be under the higher “general jurisdiction” standard, thus requiring a review of whether the defendants have had continuous and systematic general business contacts with the U.S. so as to subject them to the jurisdiction of U.S. courts.
The Canadian defendants have had only minor contacts with the U.S. In 1993-94, one of the Canadian companies had issued bonds and debentures in the U.S. through an agent, and one of its subsidiaries has been marketing fertilizers and chemicals in the U.S.
The Court emphasizes that a non-resident corporation’s contacts with the forum that are unrelated to the litigation must be substantial in order to warrant the exercise of personal jurisdiction under Rule 4(k)(2). For example, neither meetings in the forum state to sign boilerplate contracts, or the placing of advertisements in local newspapers supply the necessary general nexus. Here, the Court finds that offering bonds and debentures in the U.S. several years before the filing of the current action does not amount to the sort of systematic business contacts required for general personal jurisdiction. The Court also rejects Consolidated’s argument that merely having a registered agent is enough for general personal jurisdiction.
Finally, the Court rejects Consolidated’s argument that one of the defendant companies is amenable to service under Rule 4(k)(2) because its subsidiary markets products in the U.S. “It is well established that as long as a parent and a subsidiary are separate and distinct corporate entities, the presence of one in a forum state may not be attributed to the other. … Generally, a foreign parent corporation is not subject to the jurisdiction of a forum state merely because a subsidiary is doing business there. Where the ‘subsidiary’s presence in the state is primarily for the purpose of carrying on its own business and the subsidiary has preserved some semblance of independence from the parent, jurisdiction over the parent may not be acquired on the basis of the local activities of the subsidiary.’” [Slip op. 19-20]
The remaining Canadian defendants have had virtually no contacts with the U.S. The Court, therefore, concludes that the district court lacked personal jurisdiction over Consolidated’s claims against all of the Canadian defendants.
Citation: Consolidated Development Corp. v. Sherritt, Inc., Nos. 97-5726 & 97-5953, 2000 WL 889749 (11th Cir. July 5, 2000).
Filed in: 2000 International Law Update, Issue7
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