U.S. Supreme Court Decides Forum Non Conveniens Case

On March 5, 2007, the U.S. Supreme Court announced its opinion in Sinochem International Co. Ltd. v. Malaysia International Shipping Corporation,[1] one of only a few Supreme Court decisions to deal squarely with the doctrine of forum non conveniens. The Court held that federal district courts need not establish jurisdiction prior to dismissing transnational litigation on the basis of forum non conveniens. Although narrow in scope, the decision resolved a significant circuit split over the proper application of the forum non conveniens doctrine, and has important implications for transnational litigation theory and practice.

Background

As summarized by the U.S. Supreme Court in Gulf Oil Corp. v. Gilbert, "The principle of forum non conveniens is simply that a court may resist imposition upon its jurisdiction even when jurisdiction is authorized . . . ."[2]) The doctrine gives a U.S. federal district court the discretion to dismiss transnational litigation - cases involving actors of more than one nationality or concerning activity or property with connections to more than one nation - in favor of a foreign court if the foreign court is available and adequate and the balance of private and public interest factors favors dismissal.[3] In deciding whether to dismiss, more deference is given to a U.S. plaintiff's choice of a U.S. forum than that of a non-U.S. plaintiff.[4]

As critics have noted, the forum non conveniens doctrine suffers from a variety of ambiguities.[5] One such ambiguity involved whether a district court had to establish subject-matter and personal jurisdiction before dismissing on forum non conveniens grounds. On the one hand, the Supreme Court's opinion in Gilbert states that "the doctrine of forum non conveniens can never apply if there is absence of jurisdiction . . . ,"[6] suggesting an affirmative answer. On the other hand, it is not uncommon for a district court to dismiss transnational litigation on forum non conveniens grounds before resolving jurisdictional issues, based on the assumption that even if, hypothetically, the court had jurisdiction, it would dismiss on forum non conveniens grounds anyway. Moreover, according to the Supreme Court's decision in American Dredging Company v. Miller, the forum non conveniens doctrine is "procedural rather than substantive,"[7] implying that, just as a district court may dismiss for lack of personal jurisdiction without first establishing subject-matter jurisdiction, it also may dismiss on forum non conveniens grounds without first establishing jurisdiction.[8] The result was a circuit split, with the D.C. and Second Circuits allowing forum non conveniens dismissals without prior resolution of jurisdictional issues, but the Third, Fifth, Seventh and Ninth Circuits disallowing such dismissals.[9]

Facts and Procedural Posture in Sinochem

The Supreme Court resolved this split in its Sinochem decision. The case arose from a dispute over a bill of lading. Petitioner Sinochem, a Chinese state-owned company, ordered steel coils from Triorient Trading, Inc., an American manufacturer, pursuant to a contract requiring shipment by April 30, 2003. Triorient had the coils shipped on a vessel subchartered from respondent Malaysia International. Upon arrival in China, Malaysia International's vessel was arrested by order of a Chinese admiralty court, based on a petition filed by Sinochem alleging that Malaysia International had falsely backdated the bill of lading to indicate an April 30 shipment, when in fact the shipment was not loaded until May. Malaysia International then sued Sinochem in the U.S. District Court for the Eastern District of Pennsylvania, alleging that Sinochem made misrepresentations to the Chinese admiralty court, leading to the vessel's arrest.

Sinochem moved to dismiss the U.S. action. The district court determined that it had subject matter jurisdiction, but that discovery would be needed before it could determine whether it had personal jurisdiction over Sinochem. However, the court dismissed the case without resolving the personal jurisdiction question, reasoning that even if, hypothetically, it did have personal jurisdiction, dismissal was appropriate under the forum non conveniens doctrine.

Malaysia International appealed to the Court of Appeals for the Third Circuit, presenting the following issue: Whether a district court must determine that it has jurisdiction before dismissing a suit on forum non conveniens grounds. The circuit court held that forum non conveniens is a non-merits ground for dismissal, but that the district court nevertheless should have concluded its jurisdictional inquiry before dismissing under the doctrine. It therefore reversed. The circuit court's reasoning was simple and somewhat formalistic. The essence of the forum non conveniens doctrine is the discretion it gives a court to abstain from exercising jurisdiction when there is a more appropriate foreign court. "As a court can only abstain from jurisdiction it already has, if it has no jurisdiction ipso factoit cannot abstain from the exercise of it."[10] Thus, "the very nature and definition of forum non conveniens presumes that the court deciding this issue has valid jurisdiction."[11] To support its holding, the circuit court pointed to the above-quoted language from the Supreme Court's Gilbert decision to the effect that the doctrine cannot apply in the absence of jurisdiction.

The Supreme Court's Decision

In a unanimous decision, the Supreme Court reversed the Court of Appeals. The Court began by emphasizing that jurisdiction is essential only when a court makes a decision on the merits of a case.[12] It then characterized forum non conveniensdismissal as a determination denying the plaintiff a decision on the merits on the ground that the merits should be decided elsewhere - a determination that "does not entail any assumption by the court of a substantive law-declaring power."[13] Therefore, the Court concluded, forum non conveniens is a non-merits ground for dismissal for which jurisdiction need not be established. This means that "[a] district court . . . may dispose of an action by a forum non conveniens dismissal, bypassing questions of subject-matter and personal jurisdiction . . . ."[14] The statement in Gilbert that the doctrine cannot apply without jurisdiction was "no hindrance to the [Supreme Court's] decision."[15] Whereas the issue in Sinochem was whether a court may dismiss on forum non conveniens grounds before deciding on jurisdiction, the issue in Gilbert was whether a court may dismiss on forum non conveniens grounds even if it has jurisdiction. Understood in that context, the Gilbert court's statement simply means that "once a court determines that jurisdiction is lacking, it can proceed no further and must dismiss the case on that account."[16]

The Court concluded its opinion by noting that "[i]f . . . 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" rather than on the ground of forum non conveniens.[17] In light of this caveat, it would be reasonable to interpret the court's holding as being limited to cases in which it is less burdensome for the district court to resolve the forum non conveniens issue than the jurisdictional issues, even though such a "relative burden" test may prove difficult to apply consistently in practice.

Conclusion

Perhaps of broader significance than what the Supreme Court decided in Sinochem is the style of its reasoning and what it did not decide. The Sinochem decision represents a pragmatic approach to transnational litigation. As the Court emphasized, to require the district court to resolve the jurisdictional issue would have led to burden and delay?"[a]nd all to scant purpose: The District Court inevitably would dismiss the case without reaching the merits, given its . . . forum non conveniens appraisal."[18] Such an outcome also would disserve judicial economy and be in tension with one of the stated purposes of forum non conveniens: to reduce inconvenience. The circuit court had acknowledged these concerns in its opinion, but concluded that its hands were tied: "precedent, logic, and the very terms of the forum non conveniens doctrine dictate this result."[19]

The Court declined to decide whether a district court must establish its jurisdiction before conditioning a forum non conveniens dismissal on the defendant's waiver of jurisdictional or limitations defenses in the foreign court. Given that conditional dismissal is a common practice, this is a significant issue.[20] Moreover, whether the availability and adequacy prongs of the forum non conveniens doctrine's alterative forum analysis sufficiently protect plaintiffs' interests has been questioned by commentators.[21] But the facts and issues raised in the Sinochem case did not give the Supreme Court an opportunity to make a foray onto this more controversial terrain.

About the author
Chris Whytock, and ASIL member, is a Ph.D. candidate at Duke University and will join the faculty of the University of Utah S.J. Quinney College of Law in the fall.

Footnotes

[1] 549 U.S. _ (2007) (available at http://www.supremecourtus.gov/opinions/06pdf/06-102.pdf).
[2] 330 U.S. 501, 507 (1947).
[3] Piper Aircraft Co. v. Reyno, 454 U.S. 235 (1981).
[4] Id.
[5] See, e.g., Martin Davies, Time to Change the Federal Forum Non Conveniens Analysis, 77 Tul. L. Rev. 309 (2002); David W. Robertson, The Federal Doctrine of Forum Non Conveniens: "An Object Lesson in Uncontrolled Discretion," 29 Tex. Int'l L. J. 353 (1994); Allan R. Stein, Forum Non Conveniens and the Redundancy of Court-Access Doctrine, 133 U. Penn. L. Rev. 781 (1985); and Russell J. Weintraub, International Litigation and Forum Non Conveniens, 29 Tex. Int'l L. J. 321 (1994).
[6] 330 U.S. at 504.
[7] 510 U.S. 443, 453 (1994).
[8] Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574, 585 (1999) (holding that "while . . . subject-matter jurisdiction necessarily precedes a ruling on the merits, the same principle does not dictate a sequencing of jurisdictional issues," and noting that "[i]t is hardly novel for a federal court to choose among threshold grounds for denying audience to a case on the merits").
[9] Prior to the announcement of the Supreme Court's decision in Sinochem, the Seventh Circuit switched positions. Intec USA, LLC, v. Engle, 467 F.3d 1038 (7th Cir. 2006).
[10] Malaysia International Shipping Corporation v. Sinochem International Co. Ltd., 436 F.3d 349, 363 (3d Cir. 2006).
[11] Id. at 361.
[12] 549 U.S. _, slip op. at 7-8.
[13] Id. at 8-9.
[14] Id. at 8.
[15] Id. at 11.
[16] Id. at 10-11.
[17] Id. at 12 ("[i]n the mine run of cases, jurisdiction will involve no arduous inquiry and both judicial economy and the consideration ordinarily accorded to the plaintiff's choice of forum should impel the federal court to dispose of [those] issue[s] first") (internal citations omitted).
[18] Id. at 11-12.
[19] 436 F.3d 349, at 364.
[20] An empirical study on forum non conveniens decisions has estimated that U.S. district courts impose such conditions in 42 percent of forum non conveniens dismissals. Christopher A. Whytock, Transnational Law, Domestic Courts, and Global Governance (Mar. 2007) (paper to be presented at the 2007 annual meeting of the American Society of International Law, draft available at http://ssrn.com/abstract=976274).

[21] See id. at 27-30 (finding that in practice, district courts usually do not engage in a complete alternative forum analysis before dismissing on forum non conveniens grounds); and Wright, Miller & Cooper, Federal Practice and Procedure: Jurisdiction 3d §3828.3 (2007) (noting that "the failure of federal courts to inquire more searchingly into the adequacy of an alternative forum before granting a dismissal on forum non conveniens grounds" is disturbing).