News & Developments: E-Flash for March 2007

Supreme Court Clarifies When Jurisdiction Must Be Established Prior To Dismissal on a Non-Merits Threshold Ground

Gregory A. Castanias & Victoria Dorfman, Jones Day, Washington, DC *

On March 5, 2007, in Sinochem International Co. Ltd. v. Malaysia International Shipping Corp., 127 S. Ct. 1184 (2007), the Supreme Court held that a district court was not required to first establish its own jurisdiction before dismissing a suit on forum non conveniens grounds. This decision is noteworthy for several reasons.

First, the Court resolved the split between courts of appeals on whether jurisdiction (either personal or subject-matter) needs to be conclusively established before dismissing a suit on forum non conveniens grounds. The disagreement among lower courts stemmed from the confusion over the meaning of the ban on hypothetical jurisdiction, and on how forum non conveniens fits into the decisional sequencing prescribed by that ban: In Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83 (1998), the Court held that “[w]ithout jurisdiction the court cannot proceed at all in any cause,” and may not assume jurisdiction for the purposes of deciding the merits of the case. Sinochem, 127 S. Ct. at 1191. But, shortly after Steel Co., the Court in Ruhrgas AG v. Marathon Oil Co., 526 U.S. 574 (1999), clarified that there is no mandatory “sequencing of jurisdictional issues,” and thus, a court may dismiss for lack of personal jurisdiction without first establishing subject-matter jurisdiction. Sinochem, 127 S. Ct. at 1191. Reading these cases and their progeny, the Second and the D.C. Circuits allowed forum non conveniens dismissals without requiring that the district court conclusively establish jurisdiction first. See In re Papandreou, 139 F.3d 247 (D.C. Cir. 1998), superseded by statute on other grounds; Monegasque de Reassurances S.A.M. v. Nak Naftogaz of Ukraine, 311 F.3d 488 (2d Cir. 2002). On the other side of the split, the Third, Fifth and Ninth Circuits required establishing jurisdiction before considering a forum non conveniens motion. Malaysia International Shipping Corp. v. Sinochem International Co. Ltd., 436 F.3d 349 (3d Cir. 2006); Dominguez-Cota v. Cooper Tire & Rubber Co., 396 F.3d 650 (5th Cir. 2005) (per curiam), Patrickson v. Dole Food Co., 251 F.3d 795 (9th Cir. 2001), aff’d in part, cert. dismissed in part, 538 U.S. 468 (2003). During the pendency of the case in the Supreme Court, the Seventh Circuit weighed in on the issue, endorsing the Sinochem’s position. See Intec USA, LLC v. Engle, 467 F.3d 1038, 1041 (7th Cir. 2006) (“[Judge Stapleton in his dissent in the Third Circuit] maintained that jurisdiction is vital only if the court proposes to issue a judgment on the merits. Ruhrgas says as much, 526 U.S. at 584-85, though in dictum. … It seems to us the right approach; we expect Sinochem to turn Ruhrgas’s dictum into a holding.”).

In Sinochem, the Supreme Court reversed the Third Circuit and held 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,” including subject-matter and personal jurisdiction, Sinochem, 127 S. Ct. at 1188 (emphasis added). The Court explained that forum non conveniens is a “threshold, non-merits issue” because “[r]esolving a forum non conveniens motion does not entail any assumption by the court of substantive law-declaring power.” Id. at 1192-93.

Second, by explaining that forum non conveniens is a threshold non-merits issue because it does not require the court to assume “law-declaring power,” the Court appears to have clarified, for all contexts (not just forum non conveniens), that the Steel Co.’s ban on hypothetical jurisdiction is limited to a ban on courts making merits determinations before assuring themselves of their jurisdiction. The Court stated: “Dismissal short of reaching the merits means that the court will not proceed at all to an adjudication of the cause.” Sinochem, 127 S. Ct. at 1191. That is why the Court’s prior decisions had approved of the practices—

• of declining to adjudicate state-law claims on discretionary grounds without first determining whether the court has pendent jurisdiction over those claims, Moor v. Alameda County, 411 U.S. 693 (1973);
• of abstention under Younger v. Harris, 401 U.S. 37 (1971), without determining whether the case presented an Article III case or controversy, Ellis v. Dyson, 421 U.S. 426 (1975); and
• of dismissing under Totten v. United States, 92 U.S. 105 (1876) (prohibiting suits against the Government based on covert espionage agreements), before addressing jurisdiction, Tenet v. Doe, 544 U.S. 1 (2005).

Sinochem, 127 S. Ct. at 1191. Agreeing with the Seventh Circuit’s formulation in Intec USA, 467 F.3d at 1041, the Court endorsed the principle underlying this collection of decisions: “Jurisdiction is vital only if the court proposes to issue a judgment on the merits.” 127 S. Ct. at 1191-92 (emphasis added).

Third, the Court indicated which factors render forum non conveniens dismissal appropriate. In this particular case, although remanding the case for “proceedings consistent with its opinion,” the Court elaborated on the merits of the forum non conveniens motion, making clear that the Third Circuit should affirm the district court’s forum non conveniens dismissal. As background information: The United States District Court for the Eastern District of Pennsylvania dismissed the complaint filed by plaintiff-appellant MISC against Sinochem under the doctrine of forum non conveniens. Judge Van Antwerpen detailed in his opinion the compelling bases for his determination that dismissal on forum non conveniens grounds is appropriate in the specific circumstances present here. 2004 WL 503541, at *9-12 (E.D. Pa.). The district court noted, without any argument to the contrary by MISC, that an adequate alternative forum for deciding MISC’s negligent-misrepresentation claim existed in the Chinese Admiralty Court. Id. at *12. The district court concluded that the “private interest” factors of the forum non conveniens determination, such as ease of access to sources of proof and availability of compulsory process to obtain the attendance of unwilling witnesses, pointed in favor of dismissal because the main witnesses were located in China, and the American witnesses would have to travel to China for Sinochem’s action regardless of whether MISC’s action continued in the United States. Id. at *10, *12. The district court also observed that the “public interest” factor, the avoidance of unnecessary conflict-of-laws problems, also favored dismissal because Chinese law would apply to MISC’s claim that Sinochem made negligent misrepresentations to the Chinese Admiralty Court. Id. at *11-12. Furthermore, as no United States interests were implicated, the court held that dismissal for forum non conveniens was appropriate despite the deference that must be paid to the plaintiff’s (in this case MISC’s) choice of forum. Id. at *12. The district court subsequently issued an opinion denying MISC’s motion for reconsideration of the dismissal for forum non conveniens. 2004 WL 825466 (E.D. Pa.). The Third Circuit, however, never reached the merits of the forum non conveniens motion because it held that the district court was required to first establish personal jurisdiction over Sinochem before considering the discretionary forum non conveniens ground for dismissal. Malaysia International Shipping Corp. v. Sinochem International Co. Ltd., 436 F.3d 349 (3d Cir. 2006).

The Supreme Court concluded its unanimous opinion by calling this a “textbook case for immediate forum non conveniens dismissal,” id. at 1194; emphasizing that “[t]he District Court inevitably would dismiss the case without reaching the merits, given its well-considered forum non conveniens appraisal,” id.; observing that “[j]udicial economy is disserved by continuing litigation in the Eastern District of Pennsylvania,” id.; and ultimately concluding that “the gravamen of Malaysia International’s complaint—misrepresentations to the Guangzhou Admiralty Court in the course of securing arrest of the vessel in China—is an issue best left for determination by the Chinese courts,” id.

Fourth, at the same time, the Court’s decision does not even suggest that courts ordinarily should dismiss a suit on forum non conveniens grounds at the outset. Indeed, the Court emphasized that “[i]n the mine run of cases, jurisdiction will involve no arduous inquiry and both judicial economy and the consideration ordinarily accorded the plaintiff’s choice of forum should impel the federal court to dispose of those issues first.” 127 S. Ct. at 1194 (emphasis added). But, the Court’s discussion of the limited reach of the ban on hypothetical jurisdiction—disposing of the case on the merits—means that in appropriate cases, “when considerations of convenience, fairness, and judicial economy so warrant,” “[a] district court … may dispose of an action by a forum non conveniens dismissal, bypassing questions of subject-matter and personal jurisdiction.” Id. at 1192 (emphasis added).

Fifth, the Court technically left open the question of whether a court may, prior to reaching jurisdiction, conditionally dismiss on forum non conveniens grounds by requiring defendant to waive any statute of limitations defense or objection to the foreign forum’s jurisdiction. Noting that this issue troubled the Third Circuit, id. at 1193, the Court explained that there is “no genuine risk that the more convenient forum will not take up the case” here because the proceedings to resolve the parties’ dispute are already underway in China, and “jurisdiction of the Guanghzou Admiralty Court has been raised, determined and affirmed on appeal.” Id. However, under the logic of the opinion, it would appear that conditional dismissals should be permissible as they, too, are non-merits rulings, and the court would not be “propos[ing] to issue a judgment on the merits.” Id. at 1192. Furthermore, as the Solicitor General explained during oral argument, when a court conditionally dismisses a case, it bases its ruling on its understanding of the facts as they bear on the analysis, such as that defendant agrees to waive any objection to jurisdiction; that “understanding of fact is a condition of the dismissal.” Sinochem, 06-102, S. Ct. Oral Argument Transcript at 19 (1/9/07). “If it later proves to be untrue because the defendant objects to jurisdiction of the foreign court, it would be open to the plaintiff to seek to reopen the first suit on that ground.” Id. Thus, there would be no adjudication of the merits in conditionally dismissing a case in this way.

Sixth, this decision is expected to be frequently relied upon in classes of cases involving jurisdictional statutes likely to ensnare foreign defendants, such as the Foreign Sovereign Immunities Act (FSIA) and the Alien Tort Claims Act, in matters with limited U.S. connections. Indeed, in filing amicus brief at the merits stage in support of Sinochem, the Solicitor General noted that forum non conveniens dismissal was particularly apt in Turedi v. Coca Cola Co., 2006 WL 3187156 (S.D.N.Y. Nov. 2), which allowed the district court to avoid resolving “immensely complex” questions of subject matter and personal jurisdiction in a suit brought by Turkish citizens alleging that they had been attacked and tortured by Turkish police at the direction of a Coca-Cola bottling joint venture in Istanbul. Similarly, the Solicitor General noted that it would have been particularly convenient to dismiss on forum non conveniens grounds a suit to obtain stolen Gustav Klimt paintings, see Republic of Austria v. Altmann, 541 U.S. 677 (2004), because it would have avoided years of litigation over Austria’s sovereign immunity under FSIA.

Finally, by apparently confining the ban on hypothetical jurisdiction to decisions on the merits, the logic of this Court’s decision also suggests that suits involving international interests may be properly dismissed on other non-merits grounds, such as international comity, or exhaustion, or the political-question doctrine. In fact, the D. C. Circuit has already held that the political-question doctrine can be addressed before subject-matter jurisdiction under the FSIA, on the ground that the political question doctrine is a “jurisdictional limitation.” Hwang Geum Joo v. Japan, 413 F.3d 45, 48 (D.C. Cir. 2005), cert. denied, 126 S. Ct. 1418 (2006).

In sum, the Court’s decision in Sinochem significantly enhances district courts’ ability to dispose of the cases involving international disputes with scant relation to the United States, and has enhanced the clarity of the law of jurisdiction in this area.

* The authors successfully served as counsel to Sinochem International Co., Ltd. in the United States Supreme Court in this case.