Court of Appeals Rejects, on Jurisdictional Grounds, Effort to Circumvent U.S. Sanctions to Satisfy Judgment Against Iran

The World in U.S. Courts: Fall 2014 - Personal Jurisdiction | September.24.2014

Havlish v. Royal Dutch Shell PLC, U.S. District Court for the Southern District of New York, September 24, 2014

Plaintiffs represent victims of the September 11 terrorist attacks in New York who obtained a judgment of approximately $6.1 Billion against the National Iranian Oil Company ("NIOC").  Defendant Royal Dutch Shell PLC ("RDS") is the parent holding company for two non-U.S. subsidiaries that, though unrelated commercial transactions, owe NIOC approximately $2.1 billion, but which are unable to make that payment because of EU and UK sanctions.  This suit seeks an order requiring the RDA subsidiaries to make the payment directly to the plaintiffs in order partially to satisfy the judgment.

RDS, a UK company based in the Netherlands, argued that it is not subject to general personal jurisdiction in the U.S. (the claims do not arise out of contacts between any Shell company and New York, and so the question of specific personal jurisdiction was not presented).  The U.S. District Court in New York first reviewed the New York jurisdictional statute, observing that it required a non-NY corporation to be conducting "continuous and systematic" business in the state for jurisdiction to attach.  The Court found this test was not satisfied because RDS itself did not conduct business in New York, and that its U.S. subsidiaries were not located in New York.  Nor was the Court willing to impute to RDS the New York contacts of the subsidiaries on a theory that they were so directly managed by their foreign parent that their separate legal status should be ignored.  The District Court added, without having to decide the issue, that such a theory of agency that had been used in New York to attribute the actions of a New York subsidiary to a foreign parent might no longer be good law under as a result of the U.S. Supreme Court's 2014 ruling in Daimler AG v. Bauman.  The Court also rejected the argument that the listing of RDC's securities on the New York Stock exchange was tantamount to conducting business in New York and thus did not support a finding of general personal jurisdiction.

The District Court also addressed the argument that general personal jurisdiction was alternatively available under a rule of federal civil procedure authorizing jurisdiction over a non-U.S. defendant where i) the case involves a claim under federal law, ii) the defendant cannot otherwise be sued in any U.S. state, and iii) the defendant's contacts with the U.S. as a whole would be sufficient to establish jurisdiction.  The Court concluded that the plaintiffs' claim here—for execution of an award—arose under New York law, and that RDS was not even a party to the underlying federal lawsuit that gave rise to the $6.2 Billion judgment.

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