Forum non conveniens

Listen to this article

Jurisdiction need not be established before dismissing a case on forum non conveniens grounds, the U.S. Supreme Court held on Mar. 5.

The opinion is consistent with governing Seventh Circuit precedent, Intec USA, LLC, v. Engle, 467 F.3d 1038 (7th Cir. 2006), but is noteworthy nonetheless for dicta concerning when a district court should determine its own jurisdiction first.

Sinochem International Co., Ltd., a Chinese state-owned company, and Malaysia International Shipping Corp., a Malaysian corporation, had a dispute over a shipment of steel from Philadelphia to China.

Sinochem sued Malaysia in China, and the court ordered that Malaysia’s ship be “arrested.”

Malaysia responded by suing Sinochem in U.S. District Court in Philadelphia. Sino-chem moved to dismiss on several grounds, including lack of subject matter jurisdiction, lack of personal jurisdiction, and forum non conveniens.

The court concluded that it had subject mater jurisdiction, but no personal jurisdiction over Sinochem. However, it acknowledged that additional discovery might reveal that personal jurisdiction is present. It disallowed such discovery, however, concluding that, regardless of whether jurisdiction could be established, China is a more convenient forum for the litigation.

The Third Circuit reversed, holding that a court may not dismiss a case under the forum non conveniens doctrine unless it first determines definitely that it has jurisdiction over the matter. 436 F.3d 349 (3d. Cir. 2006).

The U.S. Supreme Court granted review, and reversed the Third Circuit, in a unanimous decision written by Justice Ruth Bader Ginsburg.

The court acknowledged that, in Steel Co. v. Citizens for a Better Environment, 523 U.S. 83, 94 (1998), it stated that, “Without jurisdiction the court cannot proceed at all in any cause.”

Nevertheless, the court concluded that a court could dismiss on forum non conveniens grounds, without first determining jurisdiction, because the dismissal is not resolution on the merits: “Dismissal short of reaching the merits means that court will not ‘proceed at all’ to an adjudication of the cause.”

Quoting the Seventh Circuit in Intec USA with approval, the court iterated, “Jurisdiction is vital only if the court proposes to issue a judgment on the merits.”

Accordingly, the court held that a district court may issue a forum non conveniens dismissal, bypassing jurisdictional questions, if considerations of convenience, fairness, and judicial economy so warrant.

Before concluding, however, the court issued two caveats that attorneys and lower courts should be aware of.

First, the court acknowledged the concerns of the Third Circuit that, without first determining jurisdiction, a court cannot condition the dismissal on the defendant waiving objections in the foreign jurisdiction. In the case at bar, this was not an issue, as proceedings are already underway in China.

The court wrote, “We therefore need not decide whether a court conditioning a forum non conveniens dismissal on the waiver of jurisdictional or limitations defenses in the foreign forum must first determine its own authority to adjudicate the case.”

Thus, in future cases, if there is a legitimate question as to whether jurisdiction is present in the foreign forum, or whether the statute of limitations may have run, it would be wise to determine the jurisdictional questions first.

Second, the court wrote, “If, however, a court can readily determine that it lacks jurisdiction over the cause or the defendant, the proper course would be to dismiss on that ground.”

Thus, the decision can be limited in future cases to those in which determining personal jurisdiction will require discovery and inconvenience to the parties. If jurisdiction, or the lack of it, can be readily determined, then the question should not be bypassed.

Finally, the Supreme Court’s opinion is notewo
rthy for what it doesn’t say — not a word about whether the foreign forum has a competent or honest judicial system. In Intec USA, the Seventh Circuit discussed the issue, although it ultimately assumed that the foreign forum (New Zealand) was an honest one. Intec USA, 467 F.3d at 1040-41.

The Supreme Court, however, issued no caveats concerning whether the foreign jurisdiction has an honest judiciary.

One of the parties to this case is owned by the Chinese state, and the foreign forum is China. An argument could be made that Malaysia Shipping will not be able to get a fair hearing in China’s courts.

Yet, the court makes no mention whatsoever of such a concern. Arguably, therefore, it is not a proper consideration at all, and the Seventh Circuit’s assumption that it may be in some cases is incorrect.

David Ziemer can be reached by email.