Personal Jurisdiction/Forum Non Conveniens - The World in US Courts: Spring 2018


RETURN TO Spring 2018 Edition

Forum Non Conveniens Not Available Where Moving Defendant Failed to Establish It Was Amenable to Process in an Alternative Forum

Arcelik A.S. v. E.I. Du Pont De Nemours and Company, United States District Court for the District of Delaware, March 20, 2018

Plaintiff Arcelik, a Turkish company, sued DuPont, a US corporation based in Delaware, for damages related to Arcelik’s recall of faulty clothing dryers. Arcelik alleged the fault was caused by capacitors containing a plastic resin produced by DuPont that was causing fires. Arcelik purchased the suspect capacitors from two foreign companies, Epcos AG and Epcos India, which in turn had purchased the resin from DuPont India, a subsidiary of the US parent. DuPont moved to dismiss the case on forum non conveniens grounds, among other reasons.

The District Court in Delaware noted that the forum non conveniens doctrine permits a court to dismiss a case even where it has jurisdiction over the subject matter and the parties if the dispute is more appropriately resolved elsewhere. It stated that a request for dismissal on forum non conveniens grounds must first establish that an adequate alternative forum exists as to all defendants and then, if such alternative forum exists, must show that “private” and “public” interest factors weigh heavily in favor of dismissal. The Court noted that a forum is typically considered an available alternative if the parties are “amenable to process” there and some theory of liability would apply to the claim.

DuPont argued that India was an “alternative adequate forum” because both Epcos India and DuPont India could be sued there. The District Court disagreed and denied DuPont’s forum non conveniens motion. The Court reasoned (1) that neither Epcos India nor DuPont India, the plaintiff’s suppliers, was a party to the action (it separately found they did not have to be joined as parties), and (2) at the same time, DuPont was itself not amenable to process in India. Having held that Defendant had failed to show the existence of an alternative forum, the Court found no reason to consider each of the public and private interest factors, noting nonetheless that it was “not persuaded that Delaware is an inconvenient forum in which to litigate for DuPont.”

German Citizen Living in Hong Kong Cannot Sue Turkish Airline in New York for Emotional Distress from Cancellation of Flight from Italy to Hong Kong

Gleissner v. Turk Hava Yollari Anonim Ortakligi, US District Court for the Southern District of New York, January 17, 2018

Plaintiff Michael Gleissner, a German citizen and Hong Kong resident, sued defendant Turk Hava Yollari Anonim Ortakligi (Turkish Airlines) in New York for negligent infliction of emotional distress in connection with a cancelled flight from Italy to Hong Kong. Among other arguments, the defendant, a Turkish company, moved for summary judgment based on lack of personal jurisdiction. As a preliminary matter, the Court concluded that the airline had properly raised its jurisdictional argument in a motion for summary judgment, rather than through the typical procedure of a motion to dismiss filed at the beginning of a case. It noted that the airline had raised the jurisdictional argument in its Answer to the complaint, discovery had not yet been taken, and Gleissner had not argued that the defense had been forfeited. After analyzing this defense, the Court ultimately granted summary judgment for the defendant on the grounds that the Court lacked personal jurisdiction.

Gleissner first argued that the Court could assert “general” personal jurisdiction over the airline. But the Court noted that the requirements imposed by Due Process Clause of the US Constitution had not been satisfied. For general personal jurisdiction to attach, Due Process requires “that a corporation’s affiliations with the State are so continuous and systematic as to render it essentially at home in the forum state”; a corporation is “at home only where it is incorporated or maintains its principal place of business, except in a truly exceptional case.” Turkish Airlines, which is domiciled in Turkey with its principal place of business in Turkey, did not satisfy this test. The Court also rejected as a matter of law Gleissner’s theory that general jurisdiction could automatically attach under an “agency” theory where a non-US corporation has a US subsidiary. It also rejected Gleissner’s “solicitation plus” theory on grounds that a website merely accessible to New York residents is insufficient to support general jurisdiction.

“Specific” personal jurisdiction must also satisfy the requirements of New York’s long-arm statute and the Due Process Clause. Gleissner argued that New York law was satisfied because the airline had “transacted business within the state” and the claim arose from that business activity. While Turkish airlines may do business in New York, the Court found that Gleissner’s claim had nothing to do with it: the claim “involved an international airline ticket purchased in Hong Kong through a third party.” Finding that New York’s long-arm statute was not satisfied, the Court declined to address whether exercising specific personal jurisdiction would violate due process.

Specific Personal Jurisdiction Based on Allegation of Scheme to Target US for Sale of Diesel Automobiles That Did Not Satisfy Environmental Requirements

In re Chrysler–Dodge–Jeep Ecodiesel Marketing, Sales Practices, and Products Liability Litigation, US District Court for the Northern District of California, March 15, 2018

The plaintiffs in this consolidated multi-district litigation sued US, German and Italian manufacturers of diesel automobiles and components alleging RICO, fraud and warranty claims in connection with an alleged scheme to bypass environmental controls. Among many issues raised, the non- US  plaintiffs argued that the Court in Northern California could not assert personal jurisdiction over them.  

The Court first observed that the limits on personal jurisdiction are set by the Due Process Clause of the US Constitution, and that in cases alleging intentional torts like fraud plaintiffs must satisfy three requirements: that the defendant “purposefully directed” its conduct towards the forum, that the claim arose from or was related to those contacts, and that the exercise of jurisdiction comports with “fair play and substantial justice.” The focus of the court’s discussion was the first part of the test. The defendants argued that “purposeful direction” must be found with respect to each of the jurisdictions where consolidated cases originated. While the Court did not dispute this statement as a general matter, it also found applicable Federal Rule of Civil Procedure 4(k)(2), which provides for jurisdiction where a federal claim (like RICO) has been alleged, jurisdiction over the defendant cannot be asserted in any one State (which the defendants admitted), and the defendant have had “minimum contacts” with the US as a whole. (The Court observed that the special RICO jurisdictional provision was limited to defendants found in the US itself.)  

The Court concluded that the defendants were alleged to have had the necessary contacts with the US as a whole to support jurisdiction. “These allegations of engaging in a jointly conceived and implemented plan to manufacture and sell defective vehicles, while purposefully concealing such defects, into the United States in violation of federal and state law constitutes conduct sufficient to be deemed purposefully directed at the United States so as to constitute minimum contacts.” The defendants’ motions to dismiss on jurisdictional grounds were thus denied.

[Editor’s note: In re Chrysler–Dodge–Jeep Ecodiesel is also discussed in the Racketeer Influenced and Criminal Organizations Act (RICO) section of this report.]

Specific Personal Jurisdiction over Canadian Vodka Seller Found Where It Had Engaged Marketers, Distributors, and Legal Counsel in Forum to Obtain Required Approvals and Sell Its Vodka Within the State

The Limu Company, LLC v. Quality Craft Spirits Ltd., United States District Court for the Eastern District of Pennsylvania, March 13, 2018

Plaintiff Limu, a Florida company that markets and sells nutritional supplements and energy drinks, filed suit in Pennsylvania against defendant Quality Craft Spirits Ltd., a Canadian corporation with its principal place of business in Canada. Limu alleged infringement of its “BLU FROG” US trademark by Quality Craft, which used the mark on its vodka, as well as unfair competition and unjust enrichment. Quality Craft moved to dismiss the action for lack of specific personal jurisdiction in Pennsylvania.

The District Court recited facts showing the nature of Quality Craft’s contacts with Pennsylvania. The Canadian vodka seller had engaged Liberty Premium Brands (a Delaware company with no offices in Pennsylvania) to market its BLU FROG vodka in the US, and appointed American Spirits Exchange Ltd. (a Pennsylvania company with an office in the State) as its distributor. Quality Craft worked with American Spirits to obtain approval to sell its vodka under the BLU FROG designation in Pennsylvania, but argued that it had no physical presence in the State itself and had not taken any action in Pennsylvania.

The Court held that specific personal jurisdiction may still be asserted even where a party does not physically enter the forum State, noting the “inescapable fact . . . that a substantial amount of business is transacted solely by mail and wire communications across state lines.” The Court noted that, in addition to engaging American Spirits, Quality Craft communicated with American Spirits in Pennsylvania by mail, that American Spirits submitted requests on behalf of Quality Craft to the Pennsylvania Liquor Control Board, and that Quality Craft hired and communicated with a lawyer in Philadelphia. The Court also found that Quality Craft had begun shipping its vodka into the State and selling it through almost 200 stores in Pennsylvania. Based on these facts, the Court found that Quality Craft had “purposefully directed” its activities at Pennsylvania and had made sufficient contacts with the state to support the Court’s exercise of specific personal jurisdiction. Finally, the Court rejected Quality Craft’s unsupported assertion that it would be significantly burdened by having to defend the action in Pennsylvania, concluding that it failed to present the “compelling case” that the exercise of jurisdiction over a party having the requisite “minimum contacts” with the forum nonetheless would not comport with fair play and substantial justice.

[Editor’s note: Limu Company is also discussed in the Intellectual Property – Trademark section of this report.]

District Court Finds Personal Jurisdiction over Swiss Corporation That Required Its Distributor to Market Throughout the US

Lyngaas v. Curaden AG, US District Court for the Eastern District of Michigan, March 12, 2018

In this class action, Brian Lyngaas, a dentist, sued Swiss corporation Curaden AG and its wholly owned distributor Curaden USA under the federal Telephone Consumer Protection Act (“TCPA”). Lyngaas alleged that he received two faxes advertising Curaden AG’s products at his office in Michigan, and that these communications violated the TCPA because they were unsolicited “junk faxes” that, among other defects, did not provide a procedure for opting out of future promotions. After jurisdictional discovery, Curaden AG moved to dismiss for lack of personal jurisdiction (Curaden USA admitted the court had personal jurisdiction over it).

The District Court in Michigan rejected Curaden AG’s argument, concluding that jurisdiction was proper under Michigan’s long-arm statute or, in the alternative, under Federal Rule of Civil Procedure (“FRCP”) 4(k)(2).

The Court began its analysis by noting that generally, a plaintiff need only establish a prima facie case for personal jurisdiction to survive a motion to dismiss. However, if the court holds an evidentiary hearing on the question of personal jurisdiction, the plaintiff must then show personal jurisdiction is proper by a “preponderance” of the evidence. Because Lyngaas in this case would succeed under either standard, the Court did not decide which standard applies after jurisdictional discovery has occurred.

Michigan’s long-arm statute applies to corporations conducting business in Michigan resulting in a tort, and permits the assertion of jurisdiction to the full extent permitted under the applicable Due Process Clause of the US Constitution. The Court observed that personal jurisdiction is consistent with Due Process if (i) a defendant “purposefully availed” itself of the privilege of acting in Michigan, (ii) the plaintiff’s cause of action arose from defendant’s conduct, and (iii) the defendant’s actions have a sufficiently substantial connection with Michigan to make exercise of personal jurisdiction reasonable.

The Court held that Michigan’s long-arm statue applied because a violation of the TCPA should be treated as a tort for jurisdictional purposes, and the distribution agreement between Curaden AG and Curaden USA connected Curaden AG to the unwanted faxes.

The Court next held that exercise of personal jurisdiction over Curaden AG comported with Due Process. On the first prong of the test, the Court noted that a defendant purposefully avails itself of a given forum by affirmatively marketing its products in the forum. Here, Curaden AG had a distribution agreement with Curaden USA which required Curaden USA to market Curaden AG’s products throughout the US. The Court held that because of this requirement, Curaden AG had purposefully availed itself of the privilege of selling throughout the entire US, including Michigan specifically.

On the second prong of the Due Process analysis, the Court concluded Lyngaas’s cause of action arose out of Curaden AG’s contacts with the US because the faxes plaintiff received were advertisements for Curaden AG’s products, sent by its authorized US distributor. On the third prong of the Due Process analysis, the Court concluded that exercise of personal jurisdiction over Curaden AG would be reasonable and consistent with traditional notions of fair play because Curaden AG created Curaden USA to market products to the US, and Michigan had an interest in protecting its citizens. The Court further noted that because Curaden USA was not profitable and did not expect to turn a profit for a number of years, excluding Curaden AG from the litigation would severely limit the plaintiff’s potential recovery. Because Michigan’s long-arm statute applied, and exercise of personal jurisdiction was consistent with the Due Process Clause, the Court concluded that it had personal jurisdiction over Curaden AG.

The Court also noted that, even if Michigan’s long-arm statute did not apply, it would still have personal jurisdiction over Curaden AG under Federal Rule of Civil Procedure 4(k)(2). Under that rule, specific personal jurisdiction is appropriate if (i) the plaintiff’s claim arises under federal law, (ii) the defendant is beyond the reach of any State court of general jurisdiction, and (iii) the exercise of jurisdiction comports with the Due Process Clause. Here, the first two conditions were satisfied because Lyngaas was suing under the TCPA, a federal statute, and Curaden AG admitted the second condition was satisfied. Consistent with its earlier analysis, the Court concluded that exercise of personal jurisdiction under FRCP 4(k)(2) would comport with Due Process.  

The Court concluded that personal jurisdiction over Curaden AG was proper under either Michigan’s long-arm statute or FRCP 4(k)(2). Therefore, the Court denied Curaden AG’s motion to dismiss.

Personal Jurisdiction in Illinois Cannot Be Based on Check Deposited in New York

Midamines Sprl Ltd. v. KBC Bank N.V., US District Court for the Northern District of Illinois, January 16, 2018

Defendant KBC is a Belgian bank with branches worldwide, including in New York. It held two accounts in Belgium in the name of a Congolese mining company, Midamines Sprl, which the bank closed because of a dispute within the mining company over who controlled the accounts. KBC issued two checks in connection with closing the accounts, one denominated in US dollars and a second denominated in euros. Subsequent to the closing of the accounts, a Belgian court issued an injunction in legal proceedings between the ownership factions of Midamines Sprl which prohibited KBC from executing any payment instructions related to the accounts. In the interim, a man named Abbas claimed to have the right to act for Midamines Sprl and founded a US company called Midamines Illinois to obtain the proceeds of both checks. Pursuant to the Belgian injunction, KBC declined to pay out the two bank checks when Abbas presented them for payment. Abbas sued KBC in New York to obtain payment, but the suit was dismissed upon a finding that the dispute was subject to forum selection provision in favor of a Belgian court. After more unsuccessful litigation by Abbas, he brought the present suit in Illinois.

The Court observed that the question whether it could assert personal jurisdiction over KBC was governed by the Illinois “long arm” statute, which by its terms extended to the full extent permitted under the Due Process Clause of the Fourteenth Amendment to the US Constitution. The Court first rejected Midamines Illinois’ argument that it could assert “general” personal jurisdiction over KBC on grounds that the bank was neither incorporated in nor had its principal place of business in Illinois – the two criteria on which that determination almost always depends. The Court similarly denied the plaintiff’s request to take discovery on the point, finding no chance that KBC’s twelve Illinois-based customers could suffice to show that the bank was “at home” in the State.

The Court then rejected Midamines Illinois’ argument that it could assert “specific” personal jurisdiction over KBC, which exists “where (1) the defendant has purposefully directed his activities at the forum state or purposefully availed himself of the privilege of conducting business in that state, and (2) the alleged injury arises out of the defendant’s forum-related activities.” A third requirement is that asserting jurisdiction would not offend “traditional notions of fair play and substantial justice.” Because an intentional tort had been alleged, the Court stated that for jurisdiction to attach Midamines would be required to show that KBC had engaged in “intentionally and allegedly tortious conduct” that had been “expressly aimed at the forum state” “with the defendant’s knowledge that the effects would be felt – that is, the plaintiff would be injured – in the forum state.”

The Court found that Midamines had failed to show that KBC had “directed” its allegedly unlawful conduct towards Illinois through messages KBC sent to reverse payment of the dollar-denominated check. That check had been deposited in New York and then been made payable by Abbas to Midamines Illinois’s account. First, the Court noted that this contact would not support a claim related to the euro-denominated check, which had never been paid. Additionally, there was no evidence that KBC knew that the dollar-denominated check that Abbas had originally deposited in New York would end up in Illinois. The Court also noted precedent to the effect that merely depositing funds in one US State would not suffice to support personal jurisdiction over a payor bank elsewhere. Abbas’s argument that KBC should be deemed to have had contacts with Illinois because it knew that he had incorporated Midamines Illinois there failed because no such knowledge was shown, and in any event that specific personal jurisdiction cannot be based on a plaintiff’s association with the forum, only intentional acts by the defendant. For the same reason, the Court rejected the argument that personal jurisdiction could be based merely on the fact that the plaintiff allegedly suffered its injury in the forum.

Shareholder Derivative Action Having Substantive Ties to Israel Dismissed on Forum Non Conveniens Grounds Where Only Link to Forum Was Corporation’s Incorporation There

Path To Riches, LLC v. CardioLync, Inc., US District Court for the District of Delaware, February 21, 2018

Plaintiff Path to Riches (PTR) is a Delaware limited liability company based in New York. It is owned by a couple whose primary residence is in New York, but who live in Israel for some of the year. PTR is the majority shareholder of an Israeli company, MMT Diagnostics, which is a telemedicine business focusing on pathology that PTR alleges had plans to expand into cardiology. Certain individuals who are residents of Israel and who have links to MMT formed a Delaware corporation, CardioLync, based in Israel, which PTR alleges stole MMT’s proprietary information and committed related violations. PTR filed what the Court ultimately concluded was a shareholder derivative suit on behalf of MMT in Delaware against CardioLync and its Israeli owners. 

Although the defendants raised various jurisdictional and substantive grounds for dismissal, the Court found it necessary to address only one: the forum non conveniens doctrine. It stated that defendants seeking to apply the doctrine bear the burden of establishing its applicability, and that resolving the legal issue involves a three-step analysis: (i) whether an “adequate alternative forum” for the dispute exists, (ii) the extent of deference to be paid to the plaintiff’s choice of forum, and (iii) whether the relevant “public” and “private” interest actors favor dismissal so that litigation may proceed in a different forum.

The parties disputed whether an Israeli court could assert personal jurisdiction over all the defendants, but the defendants agreed to waive any such defense and the Court accepted the waiver. The adequacy of PTR’s remedy in Israel was addressed only briefly, with the Court observing that only in “rare circumstances” would the non- US court’s remedy be found inadequate, and only then where “the forum does not permit litigation of the subject matter of the dispute.” Notably, the burden of making such a showing was placed on the plaintiff, PTR.

As to the second factor, the Court noted that a plaintiff’s choice of forum “should rarely be disturbed.” An exception to this rule exists where the plaintiff (or real party in interest) is not American, and the US is presumed not to be convenient for it (a presumption that may be rebutted by the plaintiff). In the case at bar, the plaintiff PTR was a Delaware company owned by New York residents. But it brought its claim derivatively on behalf of MMT, an Israeli company, and the Court concluded that MMT was the “real party in interest,” and as such PTR’s choice of Delaware as a forum was entitled to some but not a full measure of deference. That being the case, the Court considered whether Delaware would be a “convenient” forum for MMT and found that it would not, given the relative absence of any connection between the State and the facts relevant to the dispute.

The Court then weighed the balance of the private and public interest factors. As to the former, it found that almost all of the relevant evidence was located in Israel, where one of the principal witnesses would be subject to compulsory process (unlike in Delaware) and where a relevant contract was executed. PTR’s principal objection, that the couple who owned a majority interest in the company lived principally in New York, was considered inadequate because the couple routinely traveled to Israel and were not named parties. The Court likewise found that the “public” interest factors – factors recognizing a jurisdiction’s connection with a dispute and burdens on the Court – likewise favored litigation in Israel. The Court considered of greatest importance that the relevant conduct allegedly occurred in that country, even as it acknowledged that Delaware had some interest in ensuring that individuals discharged fiduciary duties they may have to Delaware corporations. Finally, the Court noted that if it kept the case it would be required to address choice-of-law questions regarding each of PTR’s claims and very likely be required to apply Israeli law.

For these reasons, the case was dismissed on forum non conveniens grounds.

Non-US Bank Dismissed from Madoff Litigation Because Its Contacts with the Forum Were Too Limited and Unrelated to Claims

SPV Osus Ltd. V. UBS AG, US Court of Appeals for the Second Circuit, February 9, 2018

Victims of the Bernard Madoff fraud sued UBS AG (Germany) over its alleged role in their losses. The Court of Appeals affirmed dismissal of the bank, analyzing jurisdiction along a sliding scale in which the necessary relationship between a defendant’s conduct and the claims is increased where the defendant’s contacts with the forum are less substantial. Our article discussing this case in more detail may be found here.

RETURN TO Spring 2018 Edition

RETURN TO The World in US Courts Home Page

US Laws Discussed

Editorial Board