Sinochem International, Co., Ltd. v. Malaysia International Shipping Corp. (03/05/2007)

Question presented: Whether a district court must first conclusively establish personal jurisdiction before dismissing a suit based on the ground of forum non conveniens?

BY MOUSHUMI ANAND, MEDILL NEWS SERVICE

Two non-American companies trading with domestic companies are disputing whether they can seek legal recourse in courts here. The issue is likely to affect other global companies doing business in the U.S.

"This case will have a big impact on U.S. commerce," said Richard J. Hoskins, senior partner at Schiff Hardin LLP and a professor at Northwestern University's School of Law.

"It is a very, very important issue," said Stephen Hudspeth, attorney for the petitioner Sinochem International Co. Ltd. "It is a huge decision for the administration of justice in country."

The case also received notice from U.S. Solicitor General Paul D. Clement. An amicus brief filed by the Solicitor General supporting the petitioner, Sinochem, states that resolution of the question will have policy implications for the United States with respect to both domestic and foreign litigation.

The dispute arose in 2003, when the Chinese chemical company Sinochem International Co. Ltd. contracted with Pennsylvania–based Triorient International for the purchase of steel coil. According to the contract, the coils were to be loaded for shipment to China by April 30, 2003. According to the contract, any delays would give Sinochem the power to renegotiate or stop payments.

Triorient sub-chartered a shipping vessel from Malaysian International Shipping Corp., a Malaysian shipping company, to transport the coils. The bill of lading, a document issued by the transportation carrier to the shipper, indicated that the coils were loaded by the specified date. The ship set sail from the port of Philadelphia two days later on May 2, 2003.

On June 8, Sinochem filed a lawsuit in a Chinese Admiralty court. Sinochem charged MISC with fraudulently backdating the bill of lading to April 30 instead of May 1, preventing the Chinese chemical company from renegotiating its original contract with Triorient.

The Chinese court ordered the ship to be arrested on its arrival in Huangpu port upon its arrival. MISC posted a $9 million security for the release of the ship.

On June 23, 2003, MISC filed a case in the Eastern District Court of Pennsylvania alleging Sinochem with negligently misrepresenting the shipping vessels "fitness and suitability to load the coils" in representations made in the Chinese court. The lawsuit stated that MISC was harmed by the misrepresentation of Sinochem due to the vessel's arrest and subsequent delay.

Sinochem filed a motion in the Eastern District Court to dismiss MISC complaint for lack of subject matter and personal jurisdiction of the court, for forum non conveniens. Forum non conveniens is a doctrine employed when the court chosen by the plaintiff is inconvenient for witnesses or defendants or both.

The District Court ruled that it had subject matter jurisdiction, but did not have sufficient personal jurisdiction over Sinochem under Pennsylvania laws. The court did state that with further investigations, or discovery, it might be able to determine personal jurisdiction over Sinochem under federal laws.

But the court declined to order further discovery or rule on the issue because it concluded that dismissal was appropriate on the basis of forum non conveniens as sources of proof and key witnesses were based in China. Besides according to the court, witnesses in the US would anyway have to travel to China for the ongoing case in the Chinese court.

In addition, the court noted that an adequate alternate court to address MISC's claim existed in the Chinese Admiralty Court and thus dismissal was appropriate.

MISC filed an appeal with the 3rd Circuit Court of Appeals. The divided panel of the Court of Appeals on Feb. 6, 2006, noted that the District Court should have determined whether it had personal jurisdiction before ruling on Sinochem's forum non conveniens.

In fact, courts of appeals are split 2-4 on the issue of whether a district court should determine personal jurisdiction before deciding forum non conveniens. Two courts of appeals, the D.C. Circuit and the 2nd Circuit, have held that forum non conveniens can be decided prior to ascertaining jurisdiction. By contrast, the 3rd Circuit joined the Fifth, Seventh, and Ninth Circuits, and held the opposite—that forum non conveniens dismissal cannot precede a determination of jurisdiction.

The 3rd Circuit Court of Appeals acknowledged that its holding was inconsistent with interests of judicial economy, recognized that its ruling deepened the existing divide between the circuits and invited the Supreme Court's review.

The question presented to the Court is whether a district court should conclusively establish personal jurisdiction before dismissing a case on the basis of forum non conveniens.

"If a court rules on forum non conveniens it is assuming jurisdiction," Hoskins said. He added that he believed that a court must first decide jurisdiction before applying forum non conveniens.

But while the Court is reviewing a narrow aspect of the case, its ruling is likely to have larger implications on how courts rule on disputes related to international commerce according to petition for writ of certiorari filed by Sinochem.

Further, the petition states that the case may determine how, in this age of global trade, international courts determine where a dispute should be geographically resolved.

And finally, the case could establish whether courts, which are burdened with caseloads, should exercise judicial efficiency while making decisions, according to the petition.

The Solicitor General's brief also supports the argument stating, "The United States has a significant interest in maintaining the federal courts' ability to avoid unnecessary adjudication in cases that, for example, may involve delay, burdensome or sensitive discovery, or examination of difficult legal issues.

On Feb. 20, 2007, the Court issued a unanimous opinion, holding that a district court has discretion to respond at once to a defendant's forum non conveniens plea, and need not take up first any other threshold objection. In particular, wrote Justice Ruth Bader Ginsburg, a court need not resolve whether it has authority to adjudicate the cause or has personal jurisdiction over the defendant if it determines that, in any event, a foreign tribunal is the more suitable arbiter of the merits of the case.