Sinochem International v. Malaysia International Shipping
Issues
Whether the District Court for the Eastern District of Pennsylvania erred in dismissing this suit on the ground of forum non conveniens before conclusively establishing personal jurisdiction.
The forum non conveniens motion asks a court to dismiss a pending case so that the dispute may be pursued in a different, more appropriate forum. This option is increasingly popular in cases where the defendant wishes to move the case from the courts of one nation to another. In this case, a shipment from the United States to China went awry, and the parties pursued litigation in both Chinese and American courts. In one of the suits, a federal district court granted a forum non conveniens motion , although it had not conclusively established that it had jursidiction over the parties. If the Supreme Court reasons that a forum non conveniens motion may be resolved before jurisdiction is determined, then litigants will benefit from expedient court decisions in appropriate forums. However, if the Court finds that a lower court may not dismiss on the ground of forum non conveniens before conclusively establishing jurisdiction, then litigants will be faced with the potential of lengthy proceedings in inappropriate forums. The Court's decision in this case will thus affect parties involved in duplicative litigation.
Questions as Framed for the Court by the Parties
Whether a district court must first conclusively establish jurisdiction before dismissing a suit on the ground of forum non conveniens.
Facts
In 2003, a Chinese company called Sinochem contracted with an American company called Triorient Trading Inc. ("Triorient") for the purchase of a large quantity of steel coils to be loaded for shipment to China by April 30, 2003. Pursuant to the contract, Sinochem opened a letter of credit with its bank in China to provide security to Triorient. In addition, Triorient would get paid only once a valid bill of lading stating that the coils had been loaded was issued. Any dispute arising between the parties would be arbitrated under Chinese law.
Triorient subsequently sub-chartered a vessel called the M/V HANDY ROSELAND (hereinafter "Vessel") owned by a Malaysian company called MISC to transport the steel coils to China. Triorient then hired an American company called Novolog Bucks County , Inc. ("Novolog") to load the coils onto the Vessel at the Port of Philadelphia. A bill of lading dated April 30, 2003 was issued, acknowledging that the steel coils had been loaded, and the Vessel sailed for China. The Vessel was chartered from MISC to Progress Bulk Carriers, which then sub-chartered it to Pan Ocean Shipping Co., Ltd. ("Pan Ocean").
The bill of lading listed Triorient as the shipper, Sinochem as the receiver, and Pan Ocean as the carrier. On the back of the bill of lading were "Conditions of Carriage" specifying that the Hague Rules applied to it. This document also incorporated by reference a charter party -- a contract between MISC and Pan Ocean regarding the Vessel. A charter party is "[a] contract by which a ship, or a principal part of it, is leased by the owner, esp. to a merchant for the conveyance of goods on a predetermined voyage to one or more places or for a specified period of time; a special contract between the shipowner and the charterer, esp. for the carriage of goods at sea." Black's Law Dictionary 251 (Bryan A. Garner ed., 8th ed.2004).
Sinochem filed an action on May 15, 2003 in the Eastern District of Pennsylvania in which it sought discovery, pursuant to 28 U.S.C. § 1782 , regarding various aspects of the Vessel's loading, the charter party, and the bill of lading for use in an "imminent foreign proceeding." The statute provides that "[t]he district court of the district in which a person resides or is found may order him to give his testimony or statement or to produce a document or other thing for use in a proceeding in a foreign or international tribunal...." 28 U.S.C. § 1782(a) . The Eastern District of Pennsylvania granted this limited discovery.
On June 8, 2003, Sinochem also petitioned the Guangzhou Admiralty Court in China (the "Chinese Admiralty Court") for preservation of a maritime claim against MISC and for the arrest of the Vessel when it arrived in China, claiming that MISC had fraudulently backdated the bill of lading to April 30, 2003. The Chinese Admiralty Court ordered the ship arrested that same day, which was carried out at the Huangpu Port in China. When MISC posted security ($9,000,000), the Vessel was released.
MISC responded by filing suit in the Eastern District of Pennsylvania on June 23, 2003, alleging that, when Sinochem petitioned the Chinese Admiralty Court for the Vessel's arrest, it negligently misrepresented "the [V]essel's fitness and suitability to load its cargo." MISC further alleged that: (1) "[w]ith a minimal amount of investigation, Sinochem knew or otherwise should have known whether its cargo of steel had been loaded aboard the [V]essel on or by April 30, 2003"; (2) "Sinochem knew or should have known that other cargo interests and charterers would reasonably and justifiably rely on Sinochem's representation(s) that the vessel had not loaded the cargo as required"; and (3) MISC had sustained damages "[d]ue to the fraudulent representations made by Sinochem and the resulting delay to the [Vessel] in the People's Republic of China caused by said representations...."
On July 2, 2003, Sinochem then filed a complaint with the Chinese Admiralty Court alleging that it had suffered damage due to MISC's alleged backdating of the bill of lading, which had triggered payment by Sinochem to Triorient under the letter of credit's terms. The court denied MISC's motion to dismiss for lack of jurisdiction.
While these events were occurring in the Chinese courts, proceedings continued in MISC's action in the Eastern District of Pennsylvania. Sinochem filed a motion to dismiss MISC's complaint for lack of subject matter and personal jurisdiction, for forum non conveniens, and "for failure to observe the rules of international comity." The District Court granted Sinochem's motion to dismiss and later denied MISC's motion for reconsideration.
The District Court Decision
The District Court determined that it had subject matter jurisdiction over MISC's action pursuant to 28 U.S.C. § 1333 (admiralty and maritime jurisdiction) because the alleged tort – which the District Court identified as the seizure of the Vessel at a port in China – occurred on navigable waters and because the incident had a sufficient connection to maritime activity. However, the Court concluded that it did not have specific personal jurisdiction over Sinochem under the Pennsylvania long-arm statute. It concluded that dismissal was appropriate on the basis of forum non conveniens.
The District Court considered the “private interest” factors, including ease of access to sources of proof and availability of compulsory process to obtain the attendance of unwilling witnesses. It reasoned that these factors weighed in favor of dismissal because the main witnesses were located in China, and the American witnesses would have to travel to China for Sinochem's action. It reasoned further that the relevant "public interest" factor – the avoidance of unnecessary conflict-of-laws problems – also weighed in favor of dismissal because Chinese law would apply to MISC's negligent misrepresentation claim. Since no American interests were implicated, the Court held that dismissal for forum non conveniens was appropriate despite the deference that must be paid to MISC's choice of forum.
The District Court rejected MISC's argument that the choice-of-law provisions of the charter party and the bill of lading required the application of American law. The Court noted that the letter from Pan Ocean stating that American law applied to disputes under the charter party did not indicate "whether the charter party called for U.S. law to apply specifically to this type of negligence matter" and also seemed to be directed specifically at the question of which law would apply to the arrest of the Vessel. The Court determined as well that the bill of lading's choice-of-law provision was not implicated because MISC's negligent misrepresentation claim had nothing to do with the conditions of carriage of the cargo. As the dispute in this case (and the parallel Chinese proceeding) centered on the alleged backdating of the bill of lading that triggered Sinochem's payment to Triorient for the steel coils, the Court concluded that "the choice of law clause more applicable to this matter is that of the purchase contract of the steel coils, which calls for the use of Chinese law."
The District Court also issued an opinion denying MISC's motion for reconsideration of the dismissal for
forum non conveniens.
In doing so, the Court declined to consider MISC's assertion that there were additional important witnesses – the people who were retained as surveyors to observe the loading of the Vessel – located in the United States because MISC had failed to establish the connection of those witnesses to this country in responding to the motion to dismiss even though the information was available to MISC at that time. Even if these witnesses were in the United States, the Court pointed out that China had "adequate means" of compelling their testimony. The Court also noted that the Chinese High Court's decision (which was issued after the decision dismissing MISC's action had been filed) affirming Chinese jurisdiction over Sinochem's claim reinforced the District Court's prior conclusion that it could not justify forcing the parties to litigate this case twice. Finally, the District Court reiterated its choice-of-law analysis.
The case was appealed and the Court of Appeals vacated and remanded the case.
Analysis
Forum non conveniens
The forum non conveniens motion is designed to maximize the convenience of the litigating parties and avoid overburdening courts with disputes that should properly be resolved in another forum. See Malaysia Int'l Shipping Corp. Berhad v. Sinochem Int'l Co. Ltd. 2004 WL 503541(E.D.Pa.) (Not reported.). Forum non conveniens requires that a defendant shows that there is an adequate alternate forum where the litigation could take place and that the balance of private and public interest factors favors dismissal of the present action. See id. First, a court will look to ensure that an adequate forum where both parties may be haled into court exists. See id. In the present case, neither petitioner nor respondent debates the adequacy of the Chinese maritime court as an alternative forum for this dispute. See Brief for Petitioners and Brief for Respondents .
In the district court's forum non conveniens analysis, the private interest factors favored the Chinese forum. See id. The private interest factors are: relative ease of access to sources of proof, availability of compulsory process for attendance of unwilling and the cost of obtaining attendance of willing witnesses, possibility of view of premises if view would be appropriate to the action, and other practical problems that make trial easy expeditious and inexpensive. See Gulf Oil Corp. v. Gilbert 220 US 501, 508 (1947) . The district court found that vital sources of proof and witnesses in the plaintiff's action were located in China and that the plaintiffs themselves would have to travel to China anyways. See id. Consequently, the private interest factors in this case favored dismissal.
The district court also found that the public interest factors favored dismissal. The public interest factors are: administrative difficulties flowing from court congestion, the local interest in having localized controversies decided at home, the interest in having the trial of a diversity case in a forum that is at home with the law that must govern the action, the avoidance of unnecessary problems in conflict of laws or in application of foreign laws, and the unfairness of burdening citizens in an unrelated forum with jury duty See Piper , 454 U.S. at 241 . In this case, the public interest factor determination resolved around the inconvenience and inequities involved in applying Chinese maritime law in a US district court. See Malaysia Int'l Shipping Corp. Berhad v. Sinochem Int'l Co. Ltd. 2004 WL 503541(E.D.Pa.) (Not reported.).
Hypothetical Jurisdiction
Prior to granting the forum non conveniens dismissal, the district court declined to make a full inquiry into personal jurisdiction. See Malaysia Int'l Shipping Corp. v. Sinochem Int'l Co. Ltd. 436 F.3d 349, 364 (3rd Cir. 2006) . Although the district court made a proper determination that subject matter jurisdiction existed, the Federal Circuit Courts of Appeals are split 4-2 on whether a district court may rule on a forum non conveniens motion prior to finding both subject matter jurisdiction and personal jurisdiction. See id.
Petitioner argues that the majority of the Circuit Courts , including the Third Circuit , holding that forum non conveniens cannot be resolved at the outset of a case are incorrect and inconsistent with the Supreme Court's holdings in Steel Co . and Ruhrgas . See Petition for Certiorari at 8. In Steel Co . and Ruhrgas the Supreme Court banned federal courts from assuming “hypothetical jurisdiction” – that is, acting as if they had jurisdiction without considering the issue so that they could rule on a motion. See id at 12. However, Ruhrgas explicitly established that the order in which a district court considers jurisdictional issues is irrelevant. See id. In Ruhrgas , this meant that if it was easier for the court to rule that there was no personal jurisdiction in the case, then it could dismiss on those grounds rather than completing a subject matter jurisdiction inquiry that may have been far more complex and consuming of judicial resources. See Ruhrgas AG v. Marathon Oil Co. 526 U.S. 574 (1999) .
Respondent Malaysia International Shipping Company argues that Supreme Court precedent in Gulf Oil Corp. v. Gilbert clearly establishes that forum non conveniens cannot apply unless proper jurisdiction (both subject matter jurisdiction and personal jurisdiction) and venue have already been established. See Brief for Respondents at 9-10. Rather than considering forum non conveniens to be on par with subject matter jurisdiction and personal jurisdiction, Respondent categorizes forum non conveniens as a non-merits, non-jurisdictional ground for dismissal. See id at 9. Consequently, forum non conveniens is not a motion that may be considered until after jurisdictional issues have been resolved, else the district court would be assuming the type of hypothetical jurisdiction prohibited by Ruhrgas . See In re Papandreou, 139 F.3d 247 (D.C. Cir. 1998).
Forum Non Conveniens as a Jurisdictional Motion
Aside from improperly adopting hypothetical jurisdiction, Respondent argues that to resolve a forum non conveniens motion prior to establishing jurisdiction is in conflict with the nature of the forum non conveniens motion. See Brief in Opposition to Certiorari at 4. Forum non conveniens asks the court to dismiss a case properly filed in a first jurisdiction in favor of a second proper jurisdiction. See id. Analysis of subject matter jurisdiction and personal jurisdiction may reveal flaws in the pending action that require the case to be dismissed regardless of the public and private equities of concern under forum non conveniens . See id. Furthermore, forum non conveniens determinations frequently involve considering aspects of the pending action that will arise at trial on the merits. See id. It is both inefficient and inappropriate to consider merits-related issues in advance of a jurisdictional determination. See id.
Petitioner asserts that just as there is no hierarchy between any jurisdictional motion, there should also be no hierarchy between any dispositive, non-jurisdictional issues, such as forum non conveniens , that can be resolved at the outset of a case. See Brief for Petitioners at 7. It is already common practice for certain other dispositive non-jurisdictional issues to be considered in advance of jurisdictional questions, such as class certification under Federal Rule of Civil Procedure 23 , proper venue determinations, and whether a statute permits a private cause of action. See id.
Petitioner further argues that whether to consider forum non conveniens or other jurisdictional motions first should be at the district court's discretion. See Brief for Petitioners at 8. This case presents a paradigmatic example of a dispute that should be dismissed under forum non conveniens . See id. Frequently, determining whether an adequate alternate forum is truly available is time consuming for a court. See id. In such a case, a district court would be inclined to consider either or both subject matter jurisdiction and personal jurisdiction objections prior to reaching a forum non conveniens motion. See id. In essence, petitioner claims that its rule is in the interest of judicial economy and will allow to district courts to dispose of cases in the most efficient way possible. See id.
Constitutional avoidance doctrine
Generally, constitutional avoidance doctrine instructs a federal court to resolve a dispute on other than constitutional grounds whenever possible. Both subject matter jurisdiction and personal jurisdiction are required for any case to be tried in a federal court under Article III of the US Constitution . Consequently, Petitioner emphasizes that dismissing a case due to forum non coveniens rather than due to a lack of subject matter jurisdiction or personal jurisdiction is preferable whenever it is possible. See id at 10. Respondent, on the other hand, argues that forum non conveniens is a non-merits, non-jurisdictional issue that may not be considered until after jurisdiction has been established. See Brief for Respondents at 10. As such, the constitutional issues of subject matter jurisdiction and personal jurisdiction cannot be avoided since they must be considered first. See id.
Discussion
With globalization booming and international commerce underlying more and more commercial transactions, parties to a dispute are constantly finding themselves litigating in foreign forums and, sometimes, in multiple foreign forums simultaneously. See Brief for United States as Amicus Curiae at 9. The frustration and expense for companies arising from these disparate, potentially duplicative adjudications can be great. See id. To combat this problem, many countries have developed mechanisms for dismissing cases that would be best tried elsewhere, either domestically or internationally, quickly to reduce unnecessary expense and hassle. See id. At stake in Sinochem v. Malaysia International Shipping Company is the ease and speed with which such inappropriate lawsuits may be dismissed from US federal courts.
The forum non conveniens motion is designed to maximize the litigating parties' mutual convenience by determining whether a balance of private and public interest factors weighs in favor of dismissing the case pending in the US so that the same dispute may be tried in a more appropriate, adequate forum elsewhere. See Piper Aircraft Co. v. Reyno 454 U.S. 235 (1981) . Although the forum non conveniens doctrine is often employed to relocate cases from one US district to another, it is increasingly popular in cases, like Sinochem, where the defendant wishes to move the case from the courts of one nation to another. See Petition for Certiorari at 7.
Litigants always value expedient court decisions and, if a case will ultimately not be tried in the US because a forum non conveniens or similar motion will be granted, would prefer to know sooner rather than later. Consequently, if Petitioner Sinochem prevails and the Supreme Court holds that a forum non conveniens motion may be resolved before subject matter jurisdiction and personal jurisdiction for the case are determined, then such dismissals will occur promptly. See id . Deciding a forum non conveniens motion before other jurisdictional issues will also save time and resources that would otherwise be expended in discovery of evidence related to the other jurisdictional issues. See Brief for Petitioner at 9. Also, leaving “district courts with another arrow in their dismissal quivers” will save time for US courts and relieve docket congestion. See Malaysia Int'l Shipping Corp. v. Sinochem Int'l Co. Ltd. 436 F.3d 349, 364 (3rd Cir. 2006).
Conversely, it is unclear whether judicial time and litigant expense will actually be saved if forum non conveniens is considered in advance of Constitutionally-mandated jurisdictional inquiries, such as subject matter jurisdiction and personal jurisdiction. See Brief in Opposition to Certiorari at 3. In many cases, subject matter jurisdiction and personal jurisdiction do not require extensive effort to determine. See id at 4. Furthermore, it is unclear whether it is constitutionally permissible to set aside these preliminary inquiries when a forum non conveniens inquiry appears to be easier to resolve for the judge. See id.
Notably, the US writing as amicus curiae in this case has recommended that forum non conveniens inquiries be permitted prior to other jurisdictional inquiries because US companies would like the same sort of courtesy and protections when they bring a motion equivalent to forum non conveniens in foreign courts. See Brief for United States as Amicus Curiae at 9. Forum non conveniens motions are increasingly popular in maritime and international commerce cases and the US does not want to generate ill will from foreign governments who may need to return the favor of a prompt dismissal of superfluous litigations initiated in their own courts. See id.
For American civil procedure buffs, this case has an entirely different dimension unlikely to be appreciated outside legal circles. Promoting the motion to dismiss for forum non conveniens to the level of the constitutionally required jurisdictional considerations would indicate a shift in Supreme Court priorities. It would suggest that, as the country modernizes and adapts to the new global economy, the Court is willing to value judicial economy over traditional procedure. See id. Forum non conveniens involves both jurisdictional and merit-based aspects of a case. In the past, pure jurisdictional issues, specifically subject matter jurisdiction and personal jurisdiction, had to be determined before any further or merits-related issued could be considered. See Brief for Respondents at 7. If the Court allows forum non conveniens to be considered before these jurisdictional issues in the interest of convenience, then the emphasis of pre-merits litigation has changed dramatically. Conversely, if the Court affirms the primacy of subject matter jurisdiction and personal jurisdiction inquiries, then forum non conveniens and other procedural motions that have gained prevalence recently will be dealt a substantial set back.
Conclusion
This case has serious implications for litigants involved in duplicative adjudications. If the Court holds that a forum non conveniens motion may be resolved before jurisdiction is determined, then litigants will benefit from expedient court decisions in appropriate forums. However, if the Court holds that a lower court may not dismiss on the ground of forum non conveniens before conclusively establishing personal and subject matter jurisdiction, then litigants will be faced with the potential of lengthy proceedings in inappropriate forums.
Written by: Khara Ashlynn Tusa & Robin M. Davis